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Qualifying for a Loan
| Why Use a Mortgage Broker
What's the Difference Between
Pre-Qualification vs. Preapproval
Step-by-Step Loan
Process | What are FICO Scores?
How do you qualify
for a home mortgage?
Qualifying for a home mortgage
depends on whether a lender can determine if you are able and willing to repay
the loan, based on your income and credit history.
The application process is used
to determine if you will have enough income from employment or other sources to
allow you to live--and pay the mortgage. This is why the lenders will
verify your employment, bank accounts, assets, etc. The lender also looks at
your credit report to find out if you have a history of paying bills on time.
Your employment is checked to determine if you have been in the same type of
work for several years. This qualifies for the best posted mortgage rates.
A loan can also be obtained
with "stated income", or a "no income, no asset verification" with good credit.
If you are self employed, you may choose one of these options.
If you have some credit
"challenges" where things don't look so perfect, I can work with you to clarify
the record and ensure that the lender has an accurate picture of your specific
situation. We want you to be able to qualify for a home of your own!
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Why Work
With a Mortgage Broker?
A mortgage broker has flexibility and
independence from any one particular bank or lender. This gives me the
ability to work with lots of different loan programs rather than the few that
might be offered by one company--that means more selection for you,
and better chances for a mortgage that will suit your specific needs.
Lenders have different requirements and policies, and I use my knowledge of
their rules to help you get the best loan for your situation. Whether
you're looking for a 30 or 40 year mortgage or short-term interim financing,
we'll be able to work it out together.
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Pre-qualification
vs. Pre-approval
"Prequalification" is a made-up
word used in the lending industry to describe the process of determining
approximately how large a loan you might be able to obtain from a lender.
It takes into account your income, how much money you have for a down payment,
how many other debts you have and other basic factors. What a
prequalification does is give you a ballpark range so that you know what type of
homes to look at.
A "Pre-approval", on the other
hand, is an actual processing of your loan application based on your personal
information (without reference to a specific house.) A preapproval letter
from a lender says that they will definitely lend you a specific amount for a
home mortgage. It's a very strong bargaining tool when you are dealing
with sellers, as they won't have to worry if you will be able to obtain
financing for the home they want to sell you. I strongly suggest that you
proceed with a preapproval during the time you are looking for a home, since it
will make the process much faster than waiting until you have signed a contract.
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Step-by-Step
Loan Process
1. You fill out a basic
loan application (online, by phone, in my office.) You also sign
authorizations for me to obtain a credit report and verify information on your
accounts and assets.
2. I provide you with an
estimate of your closing costs within three days (this is called a "Good Faith
Estimate", and it takes into account the costs like points, escrow and title
fees, and so forth that will be charged for your loan.
3. We verify your
information, put the loan package together with your application and
documentation and send it to the underwriter, who reviews it. Sometimes
this can take a few weeks, depending on how quickly the verifications come back,
what the lender's requirements are, and so forth.
4. Once we have a "loan
approval", the lender will begin to prepare the loan documents.
Occasionally they have what are called "conditions", meaning that some of the
documentation may have to be completed before they send the documents to the
title company.
5. When documents are
ready, they are sent to the title company, who makes an appointment with you to
come in and sign them.
6. Signed documents are
sent back to the lender for a final review, the lender then "funds" the loan
(sends the money to the title company). The title company then completes
the transaction and transfers ownership of the home to you. (Or, if you
are doing a refinance, sends the check to you!)
I make it a point to ensure you
know just where your loan stands during this process, and I welcome any
questions you might have. Obtaining a loan can be stressful, but I am here
to make it as easy and simple as possible.
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What are FICO
scores?
Many borrowers hear the term
"FICO score" and don't know what it means. "FICO" stands for "FAIR ISAAC
and Company", the company that originated the computerized analysis of credit
activity by borrowers. The score is a reflection of the risk a lender
might have in loaning you money. It's based on your payment history, your
income and other factors. Most lenders these days use the FICO score as
one of the criteria in making a lending decision. If you'd like more
information, here's the link to Fair Isaac's consumer website:
www.myfico.com
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