What is the process, how does it work?
Once you’ve made the commitment to start the loan process, the real work begins. But not to worry, we will be there guiding you all the way until the full approval.
Following steps are a general outline of how the loan process works, what to expect, and things you can do to help during the process.
1. Fill out Application
We will send you the link to our secure portal, so you can easily fill out an Application on your phone/tablet or computer to get the process started.
2. Provide necessary documentation
You will need to provide us with the following documents to be able to pick the mortgage program that you can qualify for:
- Your Government-issued ID (driver’s license/ green card/ passport)
- Bank Statement (1 most recent month), showing enough funds for down payment & closing costs
- Income-proving documents:
- Are you a W2 employee? -> We need to see your 2 years of W2s + 30 most recent days of paystubs
- Are you earning as 1099? -> 2 years of 1099 statements + 30 most recent days of checks/ proof of direct deposit
- Self-employed? -> 2 years of Business & Federal Tax Returns + YTD statements from your CPA
- Situation is complicated? -> we also offer programs with no income verification
3. We analyze your needs & financial standing
Once we have your Application and documents, we will know what your goals and needs are. Next step would be to run your Credit Score with Lender approved agency and get your full credit report. There is an assessed fee for the report that the Agency charges.
“Why can’t I just use the credit score that I get for free with my credit card? It’s FICO” – you might ask.
Well, the reason we can’t use it is that there are different FICO scoring models used for different types of borrowing. There’s a FICO Score for auto loans, a FICO Score for credit cards, and yes, a FICO Score for mortgages. The risk for the Lending institution when someone opens a credit card for $5,000 and the risk when someone wants to take out a $2,500,000 loan are 2 very different risks. So scoring models are different. And to top it off, most of the time, FICO for mortgages comes much lower than FICO that it displayed in your online bank account, so just keep that in mind.
When we pull your Credit Report, we will be able to see what your liabilities are, so we can accurately calculate your DTI (Debt-to-income ratio) – that is a very important part in the pre-approval process, that is what could make or break the deal. Ideally, you want to keep it at 46% or lower. The Report is valid for 4 months, so you have time to shop for a property.
Once we understand your financial standing, we can pick the best mortgage program for you with confidence.
4. Get a pre-approval letter
Pre-approval letter is a very important part of the process and it sets you up for a smooth home buying experience. With how hot the current market is in Florida, you would need to approach a real estate agent with a Lender’s pre-approval letter in hand. It shows the Seller that you’re ready and able to buy, so you have a better chance of getting your offer accepted.
After steps 1-3, we will be able to pinpoint a loan amount for which you qualify and write a pre-approval letter for you. That will save you a lot of time since you will be able to focus exclusively on houses in your price range.
5. Go House shopping!
Your Real Estate Agent will help you in search of the best property that suits your needs and wants and will submit your offer to the Seller.
Be prepared to look at multiple properties and submit multiple offers as Florida is one of the hottest markets right now. According to Realtor.com, Miami-Dade County’s total home sales surged 142% from this time last year. In addition to homes being sold in record time (some are on the market for only a few days), many properties are being sold well above the listing price, so make sure you’re ready to outbid your competitors.
5. Do NOT apply for a new Credit
Common mistake among Borrowers:
while shopping for a new house some might get the urge to upgrade their car while they are at it or simply take out a new credit card at the shopping mall for bonus points.
DON’T DO IT!
That will result in another “hard inquiry” on your credit report that you’d have to explain to the Lender, your credit score will drop and you might not qualify anymore for that mortgage program that we carefully picked with you. Yes, you might qualify for a different program, but your terms will be different, for example, you would have to have a larger down payment or your DTI ratio could be off and your interest rate might even go up a few percent, resulting in a larger monthly payment.
Best course of action: Hold off until you sign Closing package on your new property.
6. Quiet Phase
After the Seller accepts your offer, you’ll sign a Purchase Contract. Please make sure your Closing date is 45 days ahead or more. Lenders are currently slammed with the amount of Applications they get, so the best route is to make sure there is sufficient amount of time available for the Lender to approve you.
As we have the majority of your documents already, we will submit the package to the Lender. You will get documents via email for electronic signatures: “Intent to proceed”, “Loan Estimate” and others. In Loan Estimate you will see your Loan Amount, interest rate, monthly mortgage payment and estimated Closing Costs.
After you sign those, the “quiet phase” begins, where we work very closely with the Lender, making sure they have all the necessary documents to get you and the property that you’re buying 100% approved. We might ask you to provide further documents per Lender’s request like another Bank statement, your rental agreement or to explain large cash deposits on your statement.
At the same time, there is an independent Appraisal performed on your property and you pick a hazard insurance provider for your new property.
7. Loan Closing
After “all ducks are in order” and all documents are provided and accepted, you get a “Clear to Close” from the Lender.
That means that the Closing date and time can be scheduled with your Title Company.
8. You are a Home Owner!
Congratulations on this very important milestone of your life!