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Mortgage Loan Process

What it takes to get you the best home loan. Learn the stages we go through to obtain your mortgage. Understand the main requirements for each step. Discover the documents needed in each stage.

Stages in Our Loan Process

Loan Application

Every purchase starts with an application. We need you to provide us with all the information we need to make a list of loan programs and payment options that best suit your condition. Our application process will usually take just a few minutes.

Normally, we collect basic information like your full name, phone number, and email so we can stay in touch and communicate during the process. We also need to collect other details that will help us determine which mortgage program fits all your needs.

Personal information.

Loan Consultation / Prequalification

When you work with us, you'll have a dedicated loan officer or mortgage broker who will provide options that fit your situation. Your mortgage broker is going to guide you throughout the whole loan process, work to help you select the best deal, and answer any questions you have.

You will be provided with a pre-qualification letter, which is a document that will allow your realtor to evaluate and compare properties that best suit your loan and home requirements and needs. This letter is going to contain our company information, the mortgage loan amount approved, the borrower's name, the program approved, and other details. You give the letter to your realtor and the loan process continues.

Pre-qualification letter.

Home Shopping

Your realtor will help you find the right property for the loan amount approved. They will also consider your home requirements and needs, like property area, the number of bedrooms, neighborhood options, and more.

Once you choose the home, your realtor will advise you and help you make offers to the seller, and negotiate a purchase price.

When both parties reach an agreement on the terms, your real estate agent will forward a copy of the sales contract to us so we can have every detail ready for you by your closing date.

Sales contract.

Loan Processing

Once we have your sales contract we start processing it to establish a loan estimate and work up the required disclosures for you to fully review. If you agree with all the statements, you permit us to proceed. After that, your loan will be set up and processed as we create the necessary documentation and work to get everything in place to make you a homeowner.

Disclosures.

Appraisal

Most mortgage loans require that a third-party appraiser review the property to make sure you're paying for its real worth. The appraiser assigned to your case will evaluate your property, taking into account a set of standards. Afterward, they will send a report back to us for review. We usually work with the appraiser assigned by the bank for this part of the loan process.

Appraisal evaluation.

Underwriting

As soon as your appraisal is complete, an insurance agent or underwriter will look at all aspects of the mortgage loan, like the contract, supporting documentation you provided, the appraisal party, and other important details. When the underwriter is satisfied with all the information reviewed, your mortgage loan is moved to a "Clear to Close" status.

Sales contract.

Closing

After the insurance agent issues the final approval, we will give you a Closing Disclosure to fully review. At the same time, we will prepare your mortgage loan documentation for the title company. We'll also provide you with the exact amount required to close and instructions on how to make that payment.

On closing day, all the documents will be ready for you, you will sign all the paperwork needed and get keys to your new home!

Disclosures.

Key Factors Lenders Consider For a Mortgage

There are a lot of key factors that mortgage lenders consider when you apply for a mortgage. These can include your credit score, income and job history, assets, debt-to-income ratio, and even the type of property you're looking to buy. All of these factors are used as indicators of your ability to repay the loan you owe.

Income And Job History

Mortgage lenders don't look at specific amounts when considering your income for a mortgage application. What they do want to know is if you have a steady cash flow to repay your loan. They will look into your monthly household income, employment history, and other forms of funds you have coming in such as alimony payments and child support.

Credit Score

Your credit score is a major factor that lenders consider when you get a mortgage. A high score signifies that you make your monthly payments on time and you don't have a bad credit history. On the other hand, a low score might mean that you are a risky borrower and have a history of mishandling your money.

Typically, conventional loans require a minimum credit score of 620. While loans guaranteed by the government usually need a score of at least 580 depending on the loan program you choose.

With a higher credit rate, you can get access to lower interest rates and better lender options. So it might be a good idea to improve your credit rating before you apply for a loan.

Debt-To-Income Ratio (DTI)

Just like your credit score and income stability, your debt-to-income ratio is also a factor used by lenders to know if you have enough cash flow to qualify for a mortgage loan.

To calculate your DTI, you need to take all your minimum monthly debt payments and divide them by your gross monthly income. The debts that are included in your DTI are recurring debts such as student loans, auto loans, and credit card statements.

The required DTI lenders are looking for will depend on what type of mortgage you're applying for. For example, a conventional loan will often require a DTI of 50% or less. While a USDA loan will require a DTI of 41%.

Assets

Other than the typical earnest money deposits, down payment, and closing costs, you also want to have some extra funds in your bank when applying for a loan. The mortgage lender would want to ensure that you'll still be able to make your monthly mortgage payments if ever you experience financial difficulties. To do this, they would look at any assets you might have. This can include your savings accounts, taxable investments, and retirement accounts.

Property Type

The mortgage loan that you get, including the interest rate and homebuyer requirements needed, might be affected by the type of property you're planning to purchase. This is because property type can alter the level of risk for your mortgage lender.

If you're planning to get a small single-family home to use as a primary residence, you'll notice that you are more likely to get better terms than when getting an investment property. Mortgage lenders are more hopeful that you'll stay up-to-date with your payments because primary housing costs are already factored into most people's budgets.

Whereas with investment properties, homeowners are likely to put it behind primary residences if ever financial problems occur. To offset the potential risks, mortgage lenders will often require a higher credit rating and a larger down payment to qualify for an investment property loan.

WE WORK WITH THE MOST POPULAR MORTGAGE PACKAGES

Selecting the right mortgage loan is very important. As mortgage brokers we make sure you get the best deal available for your home loan.

Conventional Loan

No PMI required with a 20% down payment.
Can be used for a wide range of property types.
Higher loan limits than some government-backed programs.
Flexible loan terms with adjustable-rate and fixed-rate options.

VA Loan

100% financing available with full VA entitlement.
No private mortgage insurance required (PMI).
No prepayment penalty.
Guaranteed by the government.
Lenders have limitations.
Loans are assumable.

FHA Loan

Low minimum credit score of 500.
Government-insured Loan program.
Flexible qualification for first-time homebuyers.
3.5% down payment with a credit score of 580+.
Closing costs could be paid by the seller, home builder, or lender.

USDA Loan

0% down payment or lower down payment than other loan products.
Low private mortgage insurance (PMI).
Easier qualifying requirements for those with lower credit scores.
Can finance 100% of the home's purchase price.

What Documents Are Required To Get A Mortgage?

To speed up your mortgage process, it can be helpful to get all your paperwork ready beforehand. Here are some of the documents that mortgage lenders often require when you apply for a mortgage.

Proof Of Income

First off, you need proof that you'll be able to repay your mortgage. To do this, your lender will ask you to provide documents to verify your income. These documents might include: 

  • Federal tax returns from the last 2 years
  • 2 most recent W-2s and pay stubs
  • For self-employed borrowers, 1099 forms or profit and loss statements
  • Legal documents that prove you've been receiving child support, alimony, and other types of income from the past 6 months and documents that say you'll continue receiving them for another 3 years or so.
Credit Documentation
Mortgage lenders will ask your permission to view your three-bureau credit report. These three major credit bureaus are Experian, Equifax, and TransUnion.
Your credit documentation allows your lender to view your credit history and search for any negative factors, such as foreclosure or bankruptcy, which can make it hard for you to get a loan. It's a good idea to check your credit report for any discrepancies before a mortgage application. This will allow you time to correct these errors or gather the necessary documentation to prove that the negative factors in your credit report do not occur regularly.
Proof Of Assets And Liabilities

Your mortgage lender will also ask for income and asset documentation. This can include the following: 

  • 60 days' worth of bank statements from your savings and checking accounts
  • Recent statements from your investment or retirement accounts
  • Proof of gift funds deposited into your account from the last 2 months
  • Documentation from the sale of any assets
  • Documentation for any debts you might owe such as an auto loan or student loan

Providing your lender with these documents will help make your mortgage process a lot easier. So make sure to cooperate whenever they ask you to provide supplemental information about your financial situation.

Frequently Asked Questions

To help you prepare for your mortgage application, here are answers to some of the questions commonly asked by other applicants.

What’s a mortgage?

Mortgages are used to help you buy a home or to borrow money against the equity you have in your current home. It's an agreement between you (the borrower) and a mortgage lender (e.g. bank, credit union, or mortgage company). The mortgage lender would lend you money which you would have to repay based on the contract you signed. If ever you default on the mortgage, the lender can have the right to take your property away.

What should I do first to get a mortgage?

The first thing that you would want to do is prepare for the costs needed for a mortgage application. You can start by determining how much home you can afford and then start saving up for the down payment, closing costs, and other possible expenses. Take note that your down payment amount can have a significant effect on the details of the loan you're qualifying for.

It can also help to get a copy of your annual credit report so you can review it and resolve any errors before application.

How do I decide which offer is the best one?

Deciding which mortgage offer is the best for you will depend on your unique financial situation. Also, getting the right offer can help you save more money in the long run.

So that you'll have more options, it'll help to gather quotes from several mortgage lenders to compare their interest rates and fees. But it's not enough to know just the mortgage rates. To help you decide which offer is best for you, you need to find out the total monthly mortgage payment you need to make for each loan quote. The calculation for your monthly payments takes into account factors that we call PITI—principal, interest, taxes, and homeowner's insurance. And if your down payment is less than 20%, you'll also need to include private mortgage insurance (PMI) in your calculations.

What should I watch out for during closing?

The mortgage closing is the phase where you and the lender sign all the paperwork that will make the loan agreement final. Once the agreement is signed, you will then receive the mortgage loan proceeds, making you legally responsible to pay back the mortgage.

Other than preparing funds for the closing costs, you also need to watch out for scammers. These scammers might impersonate your loan officer and give you a call or send you an email telling you that there are last-minute changes to your agreement. They might also ask you to pay the closing costs on a different account. If ever you receive these emails or phone calls, it's always better to contact your lender directly to verify.

What credit score do I need to get approved?

The credit rating you need will depend on the type of mortgage loan you're applying for. Conventional loans will often require a credit rating of 620 or higher. FHA loans often accept a score of 580, but a higher score will help you get better rates. If you're a veteran, qualified servicemember, or spouse, you might qualify for a VA loan which requires a score of at least 580 as well. For USDA loans, which you can use to purchase a home in qualified rural or suburban areas, you'll need a minimum score of 640.

How large of a mortgage can I afford?

To calculate how much mortgage you can afford, you need to take into account items such as your household income, monthly recurring debts, and the savings amount you have for a down payment. Additionally, you also have to consider any unexpected expenses.

One of the mortgage rules that you can use is the 28/36 rule. Which states that your mortgage should not exceed 28% of your total monthly gross income and no more than 36% of your total debt.

It might also help to prepare at least three months' worth of payments, which includes your mortgage and other monthly debts. This is to ensure that you will be able to cover your mortgage payment in case of emergencies or any unexpected events.

How big of a down payment do I need?

The ideal down payment is 20% of the home's purchase price. Putting down this amount will help you avoid paying for private mortgage insurance, have lower interest rates, and therefore lower monthly payments. However, 20% down is often a huge amount for most borrowers. That's why some lenders allow for a lower down payment amount depending on the type of home loan you're applying for.

With a conventional loan, first-time homebuyers can take advantage of a 3% down while repeat borrowers can have a 5% down. For an FHA loan, you can put in at least a 3.5% down payment as long as your score is 580 or higher. If your credit score is lower than 580, you'll have to put in a 10% down payment.

VA loans usually don't require any down payment amount. However, there are specific eligibility requirements that you have to comply with. USDA loans also don't require a down payment, but you need to purchase a house in a USDA-approved rural or suburban area as well as meet certain household income requirements.

How quickly can I get a mortgage?

The length of your mortgage process, from application to closing, will usually take about 51 days. However, this will vary depending on your mortgage lender and can often take longer if you don't have the necessary documentation ready.

Moreover, you also need to keep in mind that this 51-day average does not include the time you spend looking for mortgage lenders and getting pre-approved. Thankfully mortgage brokers such as Ebenezer Mortgage Solutions can help make this part of the process easier for you.

Are You Looking Forward To Buying a Home?

Interested in how we handle our loan process?

LET OUR MORTGAGE BROKERS DO THE HARD WORK FOR YOU

AND TURN YOUR DREAM HOME INTO A REALITY

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