The Loan Process
Trust Todd Adams with Adams Financial to guide you through the Loan Process!
Get Your PreQualification Amount
How much money can you borrow? How much home can you afford?
If you are looking to buy a new home, you should start by determining what you can actually afford. The process is quick and easy, and by answering just a few questions, Todd can calculate your home-buying power.
When you know how much money a lender is likely to provide, you can limit your search to properties within a reasonable price range.
Call Todd at 760.941.2017 or CONTACT US today to get your loan underway!
Verify Your Credit Rating
How strong is your ability to repay debts? Do you make payments on or before their due dates?
Credit Scores are used by almost all lenders as they try to evaluate your credit risk. Your Credit Score is a number based on your credit history and mathematical formulas developed by Fair Isaac and Company, also known as FICO®.
Credit Scores help lenders make their financial decisions, determine credit offers and set interest rates by comparing your credit risk against that of the general population. It takes into account your entire credit history, including both "on time" and "past due" payments, new credit applications you may have made, the amount and type of credit you have already established, and more. Any lapses or delays in payment are taken into consideration and must be explained.
It helps to know that whenever you apply for a new credit card or loan, the lender will run your credit report; each new inquiry will have negative effects on your credit score. So avoid applying for new lines of credit when you are ready to look for your new home!
Review Credit by the Numbers FAQ
Your Credit Score is only one of several numbers which are used to determine your loan amount. Other values include:
- Loan-To-Value Ratio
Your Loan-To-Value Ratio, or LTV, is a percentage of the fair market value of your house; it represents the maximum amount of money that a lender is willing to provide when you purchase the property. If you have a high credit rating, lenders will be prepared to lend you a higher percentage of the value; your LTV may be 80-90%, even up to 100% if you have an excellent credit rating.
- Debt Ratio
Your Debt-to-Income Ratio, or Debt Ratio, is the ratio of your monthly payments (credit cards, auto and personal loans, alimony paid, etc) to your income (salary, interest, alimony received, etc). If your Debt Ratio is low, more of your income is available on a monthly basis; when lenders see this, they know you can afford to make higher mortgage payments.
- If your Debt Ratio is low, you can afford to make larger mortgage payments, so you may be approved for a larger loan (with a higher LTV) than the "typical" borrower.
- But if your Debt Ratio is high, you cannot afford to make the "typical" monthly payment, and your loan amount (and LTV) may be reduced; if this happens, you may need to make a larger downpayment to buy your new home.
Find Your Dream Home
Go find your Dream Home!
Select the Right Loan Program
With more than 20 years of experience with a wide variety of loan programs, Todd Adams can help you select the loan program that matches both your present circumstances and your future goals. Whether you want a first-time home loan, a home equity line of credit or an "underwater" refinance, trust Todd Adams with Adams Financial to help guide you to the right loan program for your situation!
There are many loan programs to choose from for your new or used, home or commercial, purchase or refinance. Deciding which loan makes the most sense for you means understanding the benefits of each. Whether you are building or buying a new or used home, investing in a rental property, or refinancing your existing property, two basic options are available:
Fixed Rate Mortgage
Fixed rate mortgages have monthly payments that remain consistent throughout their entire term, which is usually 15 or 30 years in duration. The interest rate and loan payments stay the same; only your taxes and insurance may increase.
This is an ideal type of loan if you
- prefer the stability of fixed monthly payments
- want to avoid the risk of future payment increases
- expect your income and spending to stay roughly the same
- expect to live in the same home for more than 7 years
Adjustable Rate Mortgage
Adjustable Rate Mortgages or ARMs may typically last for anywhere from 5 to 30 years. But unlike Fixed Rate mortgages, your interest rate will fluctuate with the national economy during that time period. This means your monthly payments can increase or decrease, usually depending on the U.S. Prime Rate.
This type of loan may work best if you
- don't mind having your payments periodically change (increase or decrease)
- are comfortable with the risk of possible increases in your monthly payments
- expect your income to continue increasing at the same-or-greater rate as the national economy
- expect to move out of your home within 5 years
Apply for Your Loan
Todd loves to take loan applications!
Choose your favorite method:
Apply by Phone
Apply by Email
Apply by FAX
Download the Mortgage Application Form, fill it out on your computer, print out the completed form, and fax it to 858.554.0517 or 760.407.1329
Apply by Hand
Download the Mortgage Application Form, print out the blank form, fill it out by hand, and mail it to:
6333 Greenwich Drive #270
San Diego, CA 92122
Get Your AU Approval
Automated Underwriting, or AU Approval, is a computer program that can approve your loan in certain circumstances. If you receive W-2s each year and have simple finances (think 1040-EZ), then the AU program may be able to approve you quickly. If your finances are more complicated, a human underwriter may be required.
You may see other initials on your underwriting paperwork: Fannie Mae's version of Automated Underwriting is called Desktop Underwriter (DU), while Freddie Mac's is called Loan Prospector (LP).
Pre-approval takes Prequalification to the next level. Pre-approval requires verification of your income, credit, assets and liabilities.
Once your loan has been pre-approved, you can
- limit your search to properties within a more specific price range,
- negotiate with the seller from a stronger position (since they know your loan will be funded), and
- close your loan more quickly (because much of the loan paperwork has already been completed).
Collect All Financial Data
This is the point at which you must collect all of your financial information, including income and expenses, to be submitted with your loan application. The following is a checklist of items you will need to provide with your final loan application — itemizing all your income and assets, any proceeds you may have from the sale of your former house, and all of your debts and obligations.
- Pay Stubs
- Copies of your most recent pay stubs, covering the most recent 30-day period and including your year-to-date income
- Copies of your W-2 forms for the past two years
- Employer Contact Information
- Names and addresses of all employers for the past two years; include a letter explaining any gaps in employment in the past two years
- Work Visa or Green Card
- Copies of the front and back of your work visa or green card, if applicable
- Alimony or Child Support
- Divorce decree or court order stating the amount, plus verification of deposit of funds for the past year
- Social Security Income, Disability or VA Benefits
- Provide award letter from agency or organization
- Proof of Other Income
- If you are self-employed or wish to have interest, dividends, commissions, bonuses or rental income considered in your loan application, you must also provide:
- Completed tax returns for the past two years, including all attached schedules and statements
- Statement of year-to-date Profit and Loss
- Federal Partnership (1065) and/or Corporate Income Tax Returns (1120) including all schedules, statements and addenda for the past two years, if applicable
- K-1's for all partnerships and S-Corporations for the past two years
- If you filed an extension, please supply a copy of the extension
- Verification of the deposit that you placed on your new home
- Bank Statements
- Your three most recent monthly statements showing savings, checking, money market funds, and any other funds you wish to disclose
- Stocks and Bonds
- Brokerage statements or copies of certificates for all stocks and bonds you own
- Gift Affidavit and verification of receipt of funds, if part of your cash was received in the form of a gift
You may also be asked to provide additional documentation. Please remember: the faster you provide the information, the smoother the loan application process.
Sale of Your House
If you are selling your existing home, you must provide several additional documents with your loan application:
- Sales Contract
- Copy of the signed sales contract, including all riders
- Listing Sheet and Legal Description
- Copy of the Listing Sheet with Legal Description of the Property, if available
- Condo-Related Paperwork
- Copies of the Condominium Declaration, by-laws and most recent budget paperwork, if available
- Realtor Contact Information
- Names, addresses and telephone numbers of the buyers' and sellers' agents
- Attorney Contact Information
- Names, addresses and telephone numbers of the real estate lawyers representing both yourself and your buyer(s)
- Insurance Agents, Builders, others' Contact Information
- Names, addresses and telephone numbers of other persons direcly involved in the sale of your house
The above documents are typically required when your new home purchase; but every situation is unique and you may be required to provide additional documentation. Please remember: the faster you provide the information, the smoother the loan application process.
- Monthly Debts
- Statements covering the past three months, and including all names, addresses, account numbers, balances and monthly payment amounts for all existing debts
- Statements covering the past two years of rent or mortgage payments, and including the name, address, account number, balance and monthly payments for each lienholder or landlord
- Alimony or Child Support
- Divorce decree or court order stating the amount and terms of the obligation
- Application Fees
- Include a check to cover Application Fees
Order an Appraisal
Your property appraisal is as important to your loan approval as your own financial information. The property must be appraised to determine its current market value; its location and comparable sales are considered during the evaluation.
Review Any Loan Conditions
You can speed up your loan process by responding quickly and thoroughly to each loan condition as it arises.
Open Your Escrow Account
As the borrower, you may be paying bills that cover your mortgage, taxes and insurance on a monthly basis. However, taxes and insurance are usually billed only once or twice a year. Your escrow account accumulates your payments, and distributes them to your tax collector and insurance company as they become due.
Start the Title Paperwork
The phrase "clear title" is used to describe a title that is free of liens and legal questions as to the ownership of the property. Clear title is a requirement for all real estate transactions.
Married couples in California can hold title to real estate in several ways, including Joint Tenancy, in Trust, Community Property, or Community Property with Rights of Survivorship. You should consult an attorney as you choose a method, since there are complex legal and tax implications connected with each one. For example,
- If a property is held in Joint Tenancy, the property automatically reverts to the surviving spouse upon death.
- With Community Property, as the law currently stands, the surviving spouse would only be responsible for taxable gains from the date of death; this can have significant tax advantages.
- In California, Rights of Survivorship may be added to Community Property, so that the property automatically reverts to the surviving spouse, removing the need for probate at the time of death.
Submit Loan Application and Data for Final Approval
All of the data you provided will be taken into account during this process. Lenders will scrutinize your financial status, including income, employment, credit and bank reports, credit rating, and all other stated assets and expenses. The property appraisal will be verified against your ability to pay, to ensure the proper loan amount.
In order to improve your chances of getting a loan approval:
- Ensure that your loan application has been completely filled out; Todd will review the paperwork with you.
- Respond promptly to any requests for additional documentation, especially if you have locked an interest rate or if your loan must close by a particular date.
- Avoid moving money into or out from your bank accounts — especially without a paper trail.
- Avoid making any major purchases until your loan is closed. Purchases can increase your debt load or deplete your assets, with adverse affects on your loan application.
- Do not travel close to your loan's closing date. If you expect to be out of town, sign a Power of Attorney to authorize another individual to sign on your behalf at closing.
Schedule Delivery of All Loan Documents
Verify Receipt of Signed Documents
The signatures must be made with the witness of a notary public, and are typically made at closing.
Receive Loan Funding
Close on Your New Home!
You also will need to show your homeowner's insurance policy, and any other requirements (such as flood insurance) with proof of payment.