Pre-qualification starts the loan process. Once Arizona Mortgage Broker Jake Taylor Home Loans has gathered information about a borrower's income and debts, a determination can be made as to how much they can pay for a house. Since different loan programs can cause different valuations, one should seek pre-qualified for each loan type for which one may qualify.
In attempting to approve homebuyers for the type and amount of mortgage they want, Arizona Mortgage Broker Jake Taylor Home Loans looks at two key factors. First, the borrower's ability to repay the loan and, second, the borrower's willingness to repay the loan.
What is 'Ability To Repay'? The ability to repay the mortgage is verified by the borrower's current employment and total income. Generally speaking, the lenders who partner with Arizona Mortgage Broker Jake Taylor Home Loans, other than the Non-QM or No Income lending aprtners, prefer for the borrower to have been employed at the same place for at least two years, or at least be in the same line of work for a few years.
The borrower's willingness to repay the loan is determined by examining how the property will be used. For example, if the borrower plans to live in the property themselves, their willingness to repay the loan may be viewed differently than if they plan to rent it out. Willingness to repay the loan is also closely related to how the borrower has fulfilled previous financial commitments, which is why the lender will review the borrower's credit report and/or rental payment history.
It's important to remember that each applicant is handled on a case-by-case basis and that no rules are set in stone. Even if a borrower comes up a little short in one area, their strengths in other areas may make up for it. Mortgage companies rely on loan business to stay in operation, so it is in everyone's best interest to see that the borrower qualifies.
When considering a mortgage program, it's important to think about long-term plans for the loan. If a borrower plansto sell the house in a few years, an adjustable or balloon loan may be more appropriate, but if they plan to keep the house for a longer period, a fixed loan may be more suitable.
The wide range of available programs, each with different rates, points, and fees, can make shopping for a loan a time-consuming and overwhelming process. However, an experienced mortgage professional at Arizona Mortgage Broker Jake Taylor Home Loans can evaluate the borrower's specific situation and recommend the most appropriate mortgage program, allowing the borrower to make a well-informed decision.
The application is the next step in the loan process. With the assistance of Arizona Mortgage Broker Jake Taylor Home Loans, you will complete the application and provide all the requested documentation.
A loan application is not considered complete until you have provided Arizona Mortgage Broker Jake Taylor Home Loans with the following information:
(1) Your name.
(2) Your income.
(3) Your Social Security number and authorization to check their credit .
(4) The address of the home you plan to purchase or refinance.
(5) An estimate of the home's value.
(6) The loan amount you wish to borrow.
A Loan Estimate is a three-page form provided by Arizona Mortgage Broker Jake Taylor Home Loans to borrowers after they have applied for a mortgage loan. This document provides important details about the loan that has been requested and must be provided to the borrower within three business days of receiving the application.
The Loan Estimate form was implemented on Oct 3, 2015 and includes information such as the estimated interest rate, monthly payment, and total closing costs for the loan. Additionally, it provides information about the estimated costs of taxes and insurance and how the interest rate and payments may change in the future. The form also indicates if the loan has special features such as penalties for early repayment (prepayment penalty) or increases to the mortgage loan balance even if payments are made on time (negative amortization), it appears in the description of the loan product.
According to the TILA-RESPA Integrated Disclosure (TRID) rule, Arizona Mortgage Broker Jake Taylor Home Loans must provide or mail the initial Loan Estimate to the borrower at least seven business days before the loan closing, and the borrower must receive the initial Closing Disclosure at least three business days before the loan closing.
It is important to note that receiving a Loan Estimate from Arizona Mortgage Broker Jake Taylor Home Loans is not the same as receiving approval on a loan. The Loan Estimate provides the details of the loan that Arizona Mortgage Broker Jake Taylor Home Loans expects to offer to the borrower based on the information provided during the pre-qualification process. Once the borrower decides to proceed with the loan, Arizona Mortgage Broker Jake Taylor Home Loans will require additional financial information before finalizing the loan approval.
After receiving the Loan Estimate from Arizona Mortgage Broker Jake Taylor Home Loans, the borrower is able to decide whether or not to move forward with the loan application. If the borrower decides not to proceed with the loan application, they do not need to take any further action. However, if the borrower intends to proceed with the loan application, they must inform Arizona Mortgage Broker Jake Taylor Home Loans in writing or by phone that they would like to move forward with the application for that loan.
*Signing the Intent To Proceed and Loan Estimate DOES NOT OBLIGATE YOU TO CLOSE A LOAN with the company you have signed with!
*You are in control, you can cncel at any time throughout the loan process.
It's worth noting that all lenders are required to honor the terms of the Loan Estimate for 10 business days. If the borrower decides to move forward more than 10 business days after receiving the Loan Estimate, it's important to be aware that market conditions may change and it may be necessary to revise the terms and estimated costs and provide a revised Loan Estimate.
After the loan application has been submitted, Arizona Mortgage Broker Jake Taylor Home Loans begins processing the mortgage. The processor orders the credit report, appraisal and title report. They then verify the information provided on the application, such as bank deposits and payment histories. Any derogatory credit marks, like late payments, collections and/or judgments, require a written explanation. The processor reviews the appraisal and title report looking for any property issues that may require further investigation. Finally, the entire mortgage package is assembled and sent to the lender for review.
Here are the six key stages of the loan process at Arizona Mortgage Broker Jake Taylor Home Loans:
When you apply for a mortgage loan with Arizona Mortgage Broker Jake Taylor Home Loans, you will be required to provide a variety of documents that verify your ability to repay the loan. This may include:
W2 Income Verification
When you apply for a mortgage loan at Arizona Mortgage Broker Jake Taylor Home Loans, they will request several documents to confirm your ability to repay the loan. They will verify your income to ensure that you have the stability and consistency to afford the mortgage payments. Here's what you will need as proof of income:
Income Tax Returns:
When you apply for a mortgage loan as a self-employed borrower at Arizona Mortgage Broker Jake Taylor Home Loans, they will need to verify your income. They will check your tax returns from the last two to three years to verify the income you reported and the deductions you claimed. You might need to provide copies of the returns along with IRS Form 4506-C, which permits the lender to obtain your tax transcript.
Alimony or Child Support Income:
For those who rely on alimony or child support as income, you will need to show proof that you will continue to receive payments for at least three years after the date of the mortgage application. A copy of the court order may be acceptable.
Self Employed Income:
For self-employed workers, freelancers and independent contractors, Arizona Mortgage Broker Jake Taylor Home Loans require at least two years of steady self-employment in the same industry. You can show this with contracts or letters from current clients, or if you own a business, you can provide your business license or proof of insurance. They may ask for at least two years' worth of federal tax returns, both personal and business, plus a cash-flow analysis form and a year-to-date profit-and-loss statement signed by a certified public accountant.
Asset and Debts:
Lenders use your debt-to-income ratio to evaluate your ability to repay a mortgage. This ratio is calculated by dividing your total monthly debt payments by your gross income. Lenders will consider all of your monthly debt obligations, including auto and student loans, credit cards, and existing mortgages, as well as your assets, such as bank and investment accounts, to determine your debt-to-income ratio. This helps them ensure that you have the financial stability to make your mortgage payments, even after paying for the down payment and closing costs.
Your lender will verify that you have the funds to cover the down payment and closing costs, as well as any cash reserves that may be required. You will typically need to provide two to three months' worth of bank statements to demonstrate your financial stability. These statements can be obtained through mail or online, depending on your bank's preferences. The lender will also require documentation to explain the source of any large deposits that appear on your statements.
Retirement and Investment Accounts:
If you intend to use funds from retirement or investment accounts to pay for your cash to close, you will need to provide two to three months' worth of statements from those accounts. This includes statements for individual retirement accounts, 401(k) plans, stock investments, and certificates of deposit. Be sure to submit all pages of the statements, including any blank ones.
Some loan programs permit the use of financial gifts from family members to make a down payment. If a family member intends to give you money for this purpose, they will need to sign a gift form attesting that repayment is not required. The lender may also request copies of the donor's bank statements to verify the source of the funds.
When applying for a home mortgage, most people do not need to be concerned about the impact of their credit history on the mortgage process. However, it is a good idea to obtain a copy of your credit report before you apply for a mortgage, so that you can address any negative information before submitting your application.
A credit profile, also known as a consumer credit file, is a report compiled by credit reporting agencies that provides information about your credit history. It includes information on how you have handled past debts and financial obligations, and is comprised of five categories:
Information not included on your credit profile are factors such as race, religion, health, driving record, criminal record, political preference, or income.
If you have had credit issues in the past, it's important to be upfront and honest about them with a mortgage professional. They can help you write a "Letter of Explanation" which explains the reasons for the credit problems such as job loss, illness or financial difficulties. If you have taken steps to correct the issues and have a track record of on-time payments for at least a year, your credit may be considered satisfactory.
The mortgage industry has its own terminology, and credit rating is no different. BC mortgage lending refers to grading of one's credit based on factors such as payment history, debt payments, bankruptcies, equity position, credit scores, etc. Credit scoring is a statistical method of assessing the credit risk of a mortgage application. The score is determined by analyzing past delinquencies, derogatory payment behavior, current debt levels, length of credit history, types of credit and number of inquiries.
Most people are familiar with credit scoring, and the most commonly used score is the FICO score. This score was developed by Fair, Isaac & Company, Inc. for the three main credit bureaus: Equifax (Beacon), Experian (formerly TRW), and Empirica (TransUnion).
FICO scores are based solely on the information in a person's credit file and do not take into account factors such as income, savings, or down payment amount. The scores are determined by five factors: 35% of the score is based on payment history, 30% on the amount owed, 15% on the length of credit history, 10% on new credit sought, and 10% on the types of credit. These scores are useful in determining loan program eligibility and underwriting levels such as Streamline, Traditional, or Second Review, but they are not the final decision on loan program or interest rate.
Some in the mortgage industry have doubts about the accuracy of FICO scores. Although scoring has only been widely used in the mortgage process for a relatively short time (since 1999), FICO scores have been used for decades by retail merchants, credit card companies, insurance companies, and banks for consumer lending. However, data from large-scale scoring projects, such as large mortgage portfolios, have shown that FICO scores are effective in predicting credit risk.
Here are some ways to improve your credit score:
A credit score of 680 or above is considered an A+ borrower and will be put through an automated underwriting system, resulting in a quick approval. Borrowers in this category are eligible for the lowest interest rates and can expect a fast closing process.A score below 680 but above 620 may indicate underwriters will take a closer look in determining potential risk. Supplemental documentation may be required before final approval. Borrowers with this credit score may still obtain "A" pricing, but the loan may take several days longer to close.
Borrowers with credit scores below 620 may not qualify for the best rates and terms offered. These loans typically go to subprime lenders and have less favorable terms and conditions. Finding the best rates for these borrowers may take more time.
When a borrower has negative credit, other factors such as equity, stability, income, documentation, assets, etc. become more important in the approval decision. Different combinations of factors can determine the credit grade, but the worst-case scenario will result in a lower credit grade. Late mortgage payments and bankruptcies/foreclosures are the most impactful factors. Credit patterns such as a high number of recent inquiries or multiple outstanding loans may also be a concern. Lenders consider willingness to pay important, hence several late payments in the same time period is better than scattered or spread out late payments.
An appraisal of real estate is the process of determining the value of the rights of ownership. The appraiser must identify the rights being appraised and does not create value, but rather interprets market data to arrive at a value estimate. The appraiser must consider various factors such as the property's location, amenities, and physical condition when compiling data for their report. A significant amount of research and data collection is required before the appraiser can reach a final opinion of value.
Three common approaches are used to derive the opinion or estimate of value, all of which are based on market data.
The mortgage underwriting process is a thorough review of a borrower's financial and credit information to determine their creditworthiness and ability to repay a mortgage loan. The underwriter will review the loan package, which includes the borrower's income, employment history, credit score, and assets, as well as the property's value and the terms of the loan. The underwriter will also verify that the borrower meets the lender's guidelines for the loan program they are applying for.
The underwriting process involves several steps:
Mortgage underwriting is typically completed after the loan package is assembled and all necessary verifications and documentation have been received. The mortgage underwriter will review the package to ensure that it meets the lender's guidelines for an acceptable loan. If the loan is approved, the underwriting process is completed.
However, if the underwriter determines that additional information is needed, the loan will be placed on hold and the borrower will be asked to provide more documentation or information. Once the underwriter has received all the information required, the loan package will be reviewed again, and if it meets the lender's guidelines, the loan will be approved.
The initial closing disclosure is provided at least three days before closing. The Mortgage Closing Disclosure, also known as the "CD" or "HUD-1 Settlement Statement," is a document that provides a detailed breakdown of the costs associated with a mortgage loan. It is required by the Consumer Financial Protection Bureau (CFPB) to be provided to the borrower at least three business days before the closing of the loan. The Closing Disclosure contains information such as the loan amount, interest rate, loan term, projected monthly payments, and a list of all the closing costs and fees. It also includes information on the escrow account and the seller's proceeds, if any.
The Closing Disclosure is intended to provide the borrower with a clear and concise summary of the terms of their loan and the costs associated with it, so they can understand and compare loan offers and make an informed decision before closing. Additionally, it provides a way to compare the costs of different loans and to compare what was estimated in the loan estimate that was provided earlier in the process.
The final Mortgage Closing Disclosure is a document provided to the borrower to be signed at or just before closing, which provides a detailed breakdown of all the costs and fees associated with the mortgage loan. It is a revised version of the Initial Closing Disclosure that was provided to the borrower 3 business days before the closing.
It provides the final terms and costs of the loan, including the loan amount, interest rate, monthly payments, and a breakdown of all the closing costs, such as origination fees, title fees, and other charges.
It also includes information about the escrow account and the seller's proceeds, if any.
The final Mortgage Closing Disclosure is intended to ensure that the borrower has a clear understanding of the terms and costs of the loan before closing. The borrower must review and sign this document before the loan can be closed, and any discrepancies should be addressed before signing.
*The Final Closing Disclosure Is One of, If Not THE MOST, Documents In Your Mortgage Process
After the initial Closing Disclosure has been provided, there are several steps that take place before the loan can be closed and the property can be transferred to the borrower.
At Jake Taylor Home Loans, we pride ourselves in providing a refreshingly simple mortgage loan process. From start to finish, our team of experts will guide you through the process and assist you with all your Arizona mortgage needs. The process begins with a pre-approval, where we review your financial information to determine your eligibility for a loan. Next, we will help you find the perfect property and assist with the loan application process.
Once the loan package is assembled, our mortgage underwriters will review it to ensure it meets the lender's guidelines. If the loan is approved, we will assist with the closing process, including the review and signing of the final Closing Disclosure, and the disbursement of funds. We are dedicated to making the mortgage loan process as stress-free as possible for our clients and it would be our pleasure to assist you with your Arizona mortgage needs.
At Jake Taylor Home Loans, we understand the importance of timely and efficient service. A standard "A" mortgage transaction can typically be completed within 14-21 business days. With the use of automated underwriting, this process can be expedited even further. If you are interested in obtaining a mortgage, don't hesitate to reach out to one of our experienced loan officers today. They will be happy to discuss your specific needs and guide you through the process. You can also apply online and a loan officer will respond to you shortly.