Our Loan Process
Here, we’ve explained our loan process in 5 simple steps to help you understand how the application works and how the process will work. We understand that taking a home loan can be a big leap for you, so we are here to help answer any questions you have at any time. Click on each step below to expand the section and learn more!
1. Understand The Important Factors In Borrowing For A Home Loan
To obtain a loan from Brad Cullipher Mortgage Group, we need to determine how much money you will and should be borrowing from the lender. There are many factors that affect your decision on how much to borrow, and we are here to help you sort through it all! Here are several major factors that will help you decide what loan is right for you.
Down Payment: As a borrower, you are expected to pay a certain amount of the loan up-front as a down payment. It is expected that this down payment come from the borrower’s checking or savings account, but in certain scenarios the borrower may receive a non-returnable gift from a family member.
Credit Score: Almost all lenders will reference a borrowers’ FICO credit score to determine the loan amount and credit worth of the borrower. A FICO credit score, which stands for Fair Isaac and Company, references several factors including length of credit history, total borrowing amount, and payment history.
LTV Ratio: A Loan-To-Value or LTV ratio compares the loan value amount to the value of the home or property (based on a property appraisal.) For example, if a borrower seeks a loan for $100,000 for a house worth $150,000, the LTV ratio is $100,000/$150,000 or 66%. The higher the LTV percentage, the riskier the loan for the lender.
Debt-to-income Ratio: Debt-to-income ratios measure the ratio of monthly debt payments (home, personal loans, auto loans) against the borrowers income. A general rule of thumb states that your monthly mortgage payment should not exceed 25-30% of your monthly income.
2. Choose Your Loan Type
Home purchase loans come with a variety of options, so choosing the right one for you and your financial situation is important. There are two basic types of loan structures, and we often get asked the difference between them. Below is a quick explanation about the difference between fixed rate and adjustable rate mortgages:
1. Fixed Rate Mortgages
Fixed Rate Mortgages typically come in 10, 15, 20, 25, or 30 year options. The term “fixed-rate” refers to the fact that your interest rate and monthly payments will stay the same month-to-month and year-to-year. A fixed rate mortgage is best if you:
– Plan to stay in the new home for more than 7 years.
– Wish to have a stable payment amount.
– Expect your income and spending to remain similar to their current amounts.
2. Adjustable Rate Mortgages
Adjustable Rate Mortgages or ARMs are usually structured for 30 years. During the life of the loan, the interest rate can go up or down (after the initial fixed-rate period.) Monthly payments may also increase or decrease over time. An adjustable rate mortgage would be best if you:
– Plan to stay in the new home less than 7 years.
– Are comfortable with monthly payments increasing or decreasing month to month.
– Expect your income to increase a significant amount in the future.
3. Fill Out The 4 Step Pre-Qualification Form
To get the official loan pre-qualification started– you will need to fill out our quick 4-step form to the best of your ability so that we can help you decide which loan is right for you.
Once you have filled out the quick form, one of our loan experts will be available to discuss your options with you. You may get pre-qualified for a loan which can be highly beneficial if you are looking to buy a new home, as the seller will be more comfortable knowing you will be approved for the loan.
4. Loan Processing and Underwriting Begins
Once you have been pre-approved and have spoke with our mortgage experts to submit the rest of the required information, the loan processing will begin! The factors that will be considered during loan processing are:
Employment or Income Check: Do you have sufficient monthly income to cover your monthly mortgage payments? Do you currently have debts that will affect you ability to pay your new mortgage?
Evaluation of Assets: Do you have enough funds in the bank to cover a down payment and monthly payments?
Appraisal of The Property: The market value of the property will be appraised to get the value for loan calculations.
Here are some quick tips to improve your chance at getting approved:
– Fill out the application form completely and accurately.
– Respond promptly to our requests for additional documents so we can keep the process moving along.
– Don’t move any money around in your accounts without a paper trail. If you are receiving money from a family member make sure to prepare a gift letter and submit it to us.
– Don’t make any major purchases while your loan is processing as it may change the conditions of the loan agreement.
– Plan to be in town around your closing date so that you are available to sign and finalize the process. If you aren’t available to sign on your closing date, you will need to sign a Power of Attorney document to authorize another individual to sign on your behalf.
5. Close The Loan
This step will finalize the loan process so that you may receive your financing! After everything is fully approved, you will need to review and sign the closing documents. Before signing make sure that all of the information like name, address, interest rates, etc. are correct. Signing of the closing documents will typically take place in front of a notary public.