Get to know the loan process 

LTV and Debt-to-Income Ratios

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LTV or Loan-To-Value ratio is the maximum amount of exposure that a lender is willing to accept in financing your purchase. Lenders are usually prepared to lend a higher percentage of the value, even up to 100% with certain programs, to creditworthy borrowers. Another consideration in setting the maximum loan amount for a particular borrower is the ratio of monthly debt payments (such as auto and personal loans) to income. A general rule of thumb is that your monthly mortgage payments should not exceed 30% of your gross monthly income. Therefore, borrowers with high debt-to-income ratio would need to pay a higher down payment in order to qualify with a lower LTV ratio.

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Credit Score

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Credit Scores are widely used by almost all types of lenders in their credit decision. It is a quantified measure of creditworthiness of an individual, which is derived from mathematical models developed by Fair Isaac and Company in San Rafael, California. Credit scores reflect the credit risk of the individual in comparison with that of general population. It is based on a number of factors including past payment history, total amount of borrowing, length of credit history, credit inquiries, and type of credit established. When you begin shopping around for a new credit card or a loan, every time a lender pulls your credit report it can adversely affect your credit score. It is, therefore, advisable that you authorize the lender/broker to run your credit report only after you have chosen to apply for a loan through them. Once you have had your credit pulled for a mortgage, there is a short window in which you can apply with other mortgage lenders and not have your credit score adversely affected with each credit pull. This is meant to allow you to shop around for the best deal

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Self-Employed Borrowers

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Self-employed individuals often encounter more challenges in qualifying for a mortgage when compared to their W2 counterparts. For many conventional lenders, the challenge in lending to self-employed borrowers comes in documenting their income. Applicants with W2 jobs can provide lenders with pay stubs and W2 forms, making it easier for lenders to verify the information through their employer. In the absence of such verifiable employment records, lenders often rely on income tax returns to verify the income of self-employed borrowers. Typically lenders need 2 years of full tax returns (business & personal) to verify self-employment income.

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Source of Down Payment

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Lenders expect borrowers to come up with sufficient funds to cover the down payment and other fees payable by the borrower at the time of funding the loan. Generally, down payment requirements are made with funds the borrowers have saved. If a borrower does not have the required down payment available in cash, they may receive “gift funds” from an acceptable donor with a signed letter stating a number of things, including that the gifted funds do not need to be paid back.

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Income/Employment Check

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Is your income sufficient to cover monthly payments for all your debt obligations, not just your mortgage? Industry guidelines are used to evaluate your income and your debts to make sure that there is an acceptable probability that you will be able to meet your debt obligations well into the future in the case that your income stays the same or rises.

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Credit Check

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What is your ability to repay debts when due? Your credit report is reviewed to let the lender take a look at your credit history, including the type and terms of previous loans or open ended accounts. Looking at your payment history and account balances, among other things, can help the lender determine what they believe your likelihood of making on-time payments is.

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Asset Check

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Do you have the funds necessary to make the down payment and pay closing costs? Due to a number of regulations set in place to prevent money laundering, just having enough money in your account or in cash does not mean that you will be able to use it for your down payment. Verifying how long you have had an asset, what type of asset it is, or where it came from will indicate whether or not an asset can be used for a down payment or cash to close.

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Property Appraisal

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Is there sufficient value in the property? When an appraisal is done, the appraiser will compare your property to other properties of similar type in the area to determine the market value of your home. The value of your home can be very important in determining the terms of your loan that are availble to you.

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Other Documentation

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In some cases, additional documentation might be required before making a final determination regarding your loan approval. In order to improve your chances of getting a loan approval:

1. Fill out your loan application completely. You may use our online forms to expedite the process.
2. Respond promptly to any requests for additional documentation especially if your rate is locked or if your loan is to close by a certain date.
3. Do not move money into or from your bank accounts without a paper trail. If you are receiving money from friends, family or other relatives, please prepare a gift letter and contact us.
4. Do not make any major purchases until your loan is closed. Purchases cause your debts to increase and might have an adverse affect on your current application.
5. Do not go out of town around your loan's closing date. If you plan to be out of town, you may want to sign a Power of Attorney.

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