Items needed for loan approval:
- Fully executed purchase contract between both parties
- Two most recent personal and business tax returns (if applicable)
- Two most recent W2’s and/or 1099’s
- Two most recent paystubs (if applicable).
- Two most recent bank/investment account statements (all pages included)
The first step in purchasing a new home should be securing the financing you will need to complete the purchase process. Receiving a written pre-qualification from a bank is a must in the high demand market area we are in currently. This will give you a competitive edge in a multiple offer situation, and the sellers will take you as a serious buyer. The pre-qualification process consists of you providing the bank your general information in addition to any income and assets you might receive. By providing this information, you will know the amount you qualify for.
The next step in securing financing is to understand the products available to you and the terms and conditions to each product. Every purchase situation is different, so one product might make more sense for you than it would for another buyer. Having multiple options available to you gives you the flexibility and peace of mind knowing you reviewed all loan products available for your purchase.
Typical loan products available for a residential purchase
Mortgage Terms to Know:
Amortization: The length of time your payments are spread out until the loan is paid off. Typical amortization periods are for 30, 20, 15 or 10 years. The longer the amortization period, the lower your monthly payment will be but the more interest you will pay.
Loan to Value (LTV): The ratio of a loan to the value of the property you are purchasing. In a purchase scenario, the value is the purchase price or the appraised value, whichever is less. For example, if you are purchasing a $500,000 home and you are putting $100,000 as the down payment, your LTV will be 80%.
Debt to Income (DTI): The ratio dividing the total monthly gross income received by any monthly debt such as a mortgage, auto loan, credit card or student loan payment.).
Private Mortgage Insurance (PMI): Insurance you will pay on a conventional loan if you do not have 20% to put down at the time of purchase. This insurance protects the lender if payments are not being made.
Down Payment: The amount of money paid in cash at the time of closing.
Escrow: The portion of your monthly mortgage payment that is set aside to pay for the annual property taxes and homeowners insurance.
Closing Costs: Fees paid at the time of closing. Typical closing costs fees are appraisal fees, title insurance and title search fees, recording and attorney fees. In some cases, closing costs can be waived for a slightly increased rate.
Prepaids Items: Expenses that the buyer “prepays” before they are actually due. These typically consist of homeowners insurance, property taxes, HOA fees, PMI and odd days interest.).