We'll guide you step-by-step through the mortgage loan process.Let the buying process begin!
The journey of purchasing a home including the mortgage loan process, can feel stressful and tedious. Where do you even start?!?
The Michelle Oddo Group will make your home buying experience as seamless as possible. That’s because we’ll work together every step of the way.
The home loan process can be straightforward when you have a complete explanation of what to expect AND when you have an expert mortgage lender to guide you along the way.
LET’S GET STARTED!
Our Loan Process
Step 1: Get Pre-Approved! Find Out How Much You Can Borrow
The first step to obtain a loan is determining how much money you can borrow. You should determine how much home you can afford before you begin looking. By answering a few simple questions, Michelle Oddo will calculate your buying power (based on standard lender guidelines). Click here to Pre-Qualify.
NEXT: GET PRE-APPROVED FOR A LOAN
After you’re pre-qualified for a loan, you’ll want to get pre-approved (what’s the difference? see Michelle’s 60 second explanation). This requires us to verify your income, credit, assets and liabilities. In the Denver metro’s highly competitive market, having a Letter of Pre-Approval allows you to confidently:
- Look for properties within your range.
- Make negotiating with the seller more effective (as the seller will know if you’re already approved).
- Close your loan quicker.
MORE ON PRE-APPROVALS
- LTV and Debt-to-Income Ratios
- FICO Credit Score
- Self Employed Borrower
- Source of down payment
LTV or Loan-To-Value ratio is the maximum exposure a lender will accept when financing your loan. Lenders are usually prepared to provide a higher percentage of the value (up to 100%) to borrowers. To approve the maximum amount of loan you can borrow is the ratio of monthly debt payments (like personal and auto loans) to your income. The rule of thumb is your monthly mortgage payments shouldn’t exceed one-third of your gross monthly income. So borrowers with high debt-to-income ratio must pay a higher down payment to qualify for a lower LTV ratio.
In credit decisions FICO Credit Scores are used by nearly all types of lenders. It’s a quantified measure of your creditworthiness that’s derived from mathematical models by Fair Isaac and Company (FICO) in San Rafael, California. FICO scores reflect the risk of loaning to you compared with the general population. It’s based on a number of factors: 1) your past payment history, 2) total amount of borrowing, 3) length of credit history, 4) search for new credit, and 5) type of credit established. *Every time a lender runs your credit report, it adversely effects your FICO score. So it’s advisable you authorize the lender/broker to run your credit report only after you’ve chosen to apply for a loan with them.
Self-employed individuals tend to have greater hurdles to borrowing than an employed person. The problems lenders run into with lending to a self-employed person is documenting their income. Applicants can provide pay stubs, which lenders will verify the information through their employer. Without such verifiable records, lenders must rely on typically two years of income tax returns.
When it’s time to fund your loan, lenders will expect you to provide the sufficient cash for the down payment and other fees. Down payment requirements are made in general with the funds you’ve saved. If you don’t have the required down payment, “gift funds” may be provided from an acceptable donor (and a signed letter stating the gifted funds don’t have to be reimbursed).
Step 2: Select The Right Loan Program
1) FIXED RATE MORTGAGE
Fixed rate mortgages usually have 10, 15, 20, 25 or 30 year terms. Throughout those years, the monthly payments and interest rates will remain the same. You’d select this loan if you:
- Plan to live in the home for more than 7 years
- Prefer the fixed principal/interest payment
- Want to avoid future monthly payment increases
- Expect your income and spending will stay the same
2) ADJUSTABLE RATE MORTGAGE
Adjustable Rate Mortgages (ARMs) can last for 10, 15, 20, 25 or 30 year terms, like fixed rate mortgages. During those years, the loan’s interest rate may go up or down (so monthly payments increase or decrease). You’d select this loan if you:
- Plan to move less than 5 years after purchasing the home
- Don’t mind your monthly payments will periodically change (up or down)
- Are comfortable risking of future payment increases
- Think your income will increase in the future
It’s highly recommended you seek profession advice as you consider these factors. You deserve to select the one loan which matches your present condition and future financial goals!
Your Pre-Approval Letter can give you an edge on the competition! As you search for a home, be sure you are working with a real estate agent. If you need recommendations, we know plenty of top-notch professionals.
Congratulations! You’ve officially signed the contract with sellers to purchase their property. Your loan will have due dates, which need to be accepted by all parties.
An Oddo Group team member will call you to lock down your loan’s rate. At this point in the loan process we’ll order the appraisal and our processor will begin updating your loan documents.
Step 4: Begin Loan Processing
- Income/Employment Check
- Your income must be sufficient to cover monthly payments. You income and debt will be evaluated through industry guidelines.
- Credit Check
- Your ability to repay debts when they are due is critical. We’ll review your credit report to determine your previous loans’ type and terms. Payment lapses or delays are considered and will require an explanation.
- Asset Evaluation
- To determine if you have the funds necessary to make the down payment and closing costs.
- Property Appraisal
- The property must have sufficient value for the loan to be approved. The market value will be determined through the property’s appraisal (location, zoning and other factors play a part in the evaluation).
- Other Documentation
- Sometimes additional documentation is required before a final determination is made on your loan approval.
IMPROVE YOUR CHANCES OF GETTING APPROVED!
- Completely fill out your loan application. Apply online to expedite the process.
- Respond promptly to requests for more documentation (especially after your rate is locked or your loan is closing by a certain date).
- Don’t move money into/from your bank accounts unless you have a paper trail. Money from friends, family or other relatives, must have a gift letter (contact Michelle for advice on preparing the letter).
- Don’t make major purchases until after your loan closes. Purchases increase your debts, so they can adversely affect your application!
- Don’t leave town around your loan’s closing date. If you have no choice, you may need to sign a Power of Attorney.
We want to make sure you have a clear understanding of your loan’s structure. So we’ll carefully review with you the loan’s documents and numbers. Once you approve it, we’ll submit it to underwriting and make sure any remaining conditions are met.
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Step 5: Close Your Loan
Signing the final loan documents is an exciting moment. Michelle will make sure you’ve reviewed the documents prior to signing. After all there should be no surprises about the interest rate and loan terms. The Oddo Group will make sure all little details are accurate on the loan documents (the name, address and etc.). Normally the signing will take place in front of a notary public.
Obtaining the mortgage and transferring the property ownership will include several fees you’ll need to pay at closing. Michelle will let you know if you need to bring or transfer a cashier’s check for those fees and down payment (personal checks are not accepted). You’ll need to provide your homeowner’s insurance policy and other required documents (such as flood insurance, proof of payment and etc.).
Your loan normally closes soon after you’ve signed the loan documents! If you have an owner-occupied refinance loan, the federal law requires you have 3 days to review the documents before the transaction can close.