Loan Process

Loan Process

What You Need to Know About the Mortgage Loan Process

If you need help with mortgages, count on none other than CNA Equity Group.
Here’s the step-by-step process of choosing the right housing loan for you:

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Step 1: Find Out How Much You Can Borrow

Before applying for a loan, you must first determine how much money you can borrow. For homebuyers, you should know your buying power before you start with your property search.

Getting Preapproved

This process requires verification of your income, credit, assets, and liabilities. We advise you to get preapproved before you start searching for your new house, so you can:

  • Look for properties within your range
  • Be in a better position when negotiating with the seller
  • Close your loan quicker

Loan-to-Value Ratio

This involves the financial risk that lenders assess before financing your purchase. To put simply, the more they lend, the more risk they are taking.

Debt-to-Income Ratio

The debt-to-income ratio allows lenders to determine your likelihood of running into trouble making monthly payments. This is a key factor in approving the maximum amount of loan as it measures your ability to manage your debt to repay the money you plan to borrow.

FICO™ Credit Score

Widely used by almost all types of lenders, FICO™ scores measure the creditworthiness and reflect the credit risk of an individual. It is based on several factors, including:

  • Past Payment History
  • Total Amount of Borrowing
  • Length of Credit History
  • Search for New Credit
  • Type of Established Credit

Self-Employed Borrowers

Compared to employed individuals, a self-employed borrower may find it difficult to apply for a home loan as there are issues in documenting their income. In the absence of pay stubs and verifiable employment records, lenders usually rely on income tax returns, which they typically require for two years.

Source of Down Payment

During the time of loan funding, borrowers need to come up with sufficient cash for the down payment and other fees payable. If a borrower does not have the required money, they may receive “gift funds” from an acceptable donor with a signed letter.

Step 2: Select The Right Loan Program

There are various home loans you can choose from. The two basic types of home loans each have benefits depending on your financial situation and goals.

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Fixed-Rate Mortgage

These mortgages have fixed interest rates and monthly payments and with terms lasting 15 or 30 years. Choose this type of loan if you:

  • Plan to live at home for more than seven years
  • Like the stability of a fixed principal/interest payment
  • Do not want to run the risk of future monthly payment increases
  • Think your income and spending will stay the same

Adjustable-Rate Mortgage

Just like fixed-rate mortgages, ARMs typically last for 15 or 30 years. However, the interest rate and monthly payments may go up or down during the term. This is recommended if you:

  • Plan to stay in your home for less than five years
  • Do not mind to have your monthly payment periodically change
  • Comfortable with the risk of possible payment increases in future
  • Think your income will probably increase in the future
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Step 3: Apply for a Loan

Step 4: Begin the Loan Processing

Depending on the standards set by government agencies and the terms of each loan, the approval is based on your ability and willingness to repay the loan and property’s value. We will start the loan approval process immediately after receiving the application. Your loan processor will then verify all of the information and troubleshoot if there are discrepancies. This information includes:

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Income/Employment Check

Is your income sufficient to cover monthly payments? Lenders and loan processors use industry guidelines to evaluate your income and debts.

Credit Check

What are your creditworthiness and ability to repay debts when due? We will review your credit history to determine the type and terms of previous loans. Any lapses or delays in payment are considered and must be explained.

Asset Evaluation

Do you have sufficient funds for the down payment and closing costs?

Property Appraisal

Is there sufficient value in the property? The property is appraised to determine market value. This step includes the evaluation of the location and zoning.

Other Documentation

In some cases, additional documentation might be required before your loan gets approved.

How to Improve Chances of Getting a Loan Approval

  • Fill out your loan application completely. You may use our online forms to expedite the process.
  • Respond promptly to any requests for additional documentation, especially if your rate is locked or if your loan is to close by a certain date.
  • Do not move money into or from your bank accounts without a paper trail. Prepare a gift letter if you are receiving money from friends, family, or other relatives, then contact us.
  • Do not make any major purchases until your loan is closed. Purchases can cause your debts to increase and might have an adverse effect on your current application.
  • Do not go out of town around your loan's closing date. If you have an out-of-town trip, you may want to sign a power of attorney.

Step 5: Close Your Loan

After your loan is approved, you are ready to sign the final loan documents in front of a notary public. Make sure to review the documents and check if the interest rate and loan terms are the same as discussed. In addition, you must verify that the name and address on the loan documents are accurate.

During Closing

You may have to pay off fees associated with obtaining a mortgage and transferring property ownership. Instead of personal checks, bring a cashier’s check for the down payment and closing costs if required. You also will need to show your homeowner's insurance policy and other requirements, such as flood insurance and proof of payment.

After Closing

Your loan will normally close shortly after you have signed the loan documents. On owner-occupied refinance loan transactions, federal law requires that you have three days to review the documents before your loan transaction can close.