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Keisha Jones
Sales Associate
REMAX |
Office Phone:
(405) 843-8448
Fax:
(405)843-9499
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"The staff at Home Owners Made Easy were easy
to work with and made me feel comfortable about obtaining a loan
as I am a first time home buyer. Thank you Home Owners Made Easy
for making it possible for my wife and I to move in our first
home."
- Douglas W.
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Mortgage loan approval
process
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What happens to your loan application once it is given to
Home Owners Made Easy?
What are the major factors that are
looked at when we are determining how much of a loan you can
afford?
Why does the process seem to be so
complicated?
When you submit your application to Home Owners
Made Easy for a mortgage loan, we are actually doing the
following:
1. Verifying your
amount of your income and the stability of your
employment
2. Verifying the amount of
other debts you currently have
3.
Determining the affordability of your new mortgage
payment
4. Verifying the source of your
down payment
5. Analyzing your past
credit history
6. Determining the
property's value
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Income
and Employment
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You will be asked to provide Home Owners
Made Easy with proof of your current gross income. Typically
this will require that you bring in a copy of your most recent pay
stub and a copy of your most recent W-2 Statement. Your pay
stub will verify that you are currently employed and will indicate
the approximate amount of income that you are currently
making. Your W-2 statement will indicate that you have been
gainfully employed for at least the past year – and it will indicate
on an average, what you make on an annual basis.
If you
derive a good source of your income from commissions, overtime
and/or bonuses, we will require that you bring in W-2 statements for
the past two years and will take an average of your income for the
most recent to years as the qualifying income on your
application.
If you are self-employed, you will be asked to
provide Home Owners Made Easy with your most recent W-2
statements (if applicable), your corporate tax returns and your most
recent financial statements. We typically will use a two-year
average of income for self-employed individuals.
When
analyzing income, we look to how much you make and also look to
ensure that you have had stable employment for at least the past two
years. You would not have to have been with the same employer
for the last two years. Even though we look for two years of stable
employment, your situation may be such that employment of less than
2 years would be acceptable. |
Verify all
debts
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| You will be asked to list all of your current
debts on your mortgage application. Your credit report will
also list all of your current debts. These debts will be added
up to ensure that you will not be overextended with debt when the
new mortgage payment is added. |
Determine
the affordability of the mortgage payment
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Once we have verified your total gross income
and added up all of your current debts, we then will compute basic
ratios to determine the affordability of your new mortgage
payment. All ratios are based on your gross monthly income
figures.
The first ratio is calculated by dividing your new
housing expense into your gross income. Your housing expense
is equal to your new mortgage payment, plus monthly real estate
taxes, monthly homeowner’s insurance, monthly PMI premiums and
monthly association dues.
For example, on a 30-year $60,000
mortgage at 6.75% the monthly principal and interest payment is
$492.57. In addition, the property real estate taxes for this
$75,000 home are $60 a month and the monthly homeowner’s insurance
is $25.00. If you were purchasing this property and you and
your spouse made a combined gross monthly income of $3,000, your
housing ratio would be computed as follows:
$492.57
$
60.00
$ 25.00
---------------
$577.57 Total Housing Expense
$577.57/$3,000 = 19.2%
The second ratio computed to
determine mortgage affordability is called the debt ratio and is
computed by adding your housing expense to any monthly recurring
debts, which you may have. If in the above example, in addition to
the monthly housing expense of $577.57, you also had a car loan of
$200 a month, a student loan of $50.00 a month and minimum charge
card payments of $60, your debt ratio would be calculated as
follows:
$577.57
$200.00
$ 50.00
$
60.00
------------------
$887.57 Total Debt Expense
$887.57/$3,000 = 29.5%
The ratios for the above
example would be 19.5 and 29.5. The industry standards for a housing
ratio are 28% and for a debt ratio is 36%. At Home Owners Made Easy,
we use the industry standards as a guide, but in reality have
approved loans with ratios much higher than 28/36. |
Verifying your
source of Down Payment
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At Home Owners Made Easy, you can purchase a
property with as little as 1-3% down payment. Your down
payment cannot be an unsecured borrowing. Examples of
acceptable forms of down payment include cash in a bank account,
mutual funds, stocks, proceeds from the sale of another property,
IRA/401K or gift from an immediate relative.
When you come in
for your application you will be asked to bring in copies of your
most recent bank statements or account records in order to verify
that the down payment funds are available. The statements
must indicate that the funds have been in the account or another
acceptable form of account for at least 3 months. |
Analyzing your credit
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Once you have made application with Home
Owners Made Easy, one of the first things that is done is a credit
report is ordered. If you are married, and your spouse is
also applying on the loan application, we will order a joint credit
report. In a joint credit report, any accounts held
individually by each spouse will be reported in separate individual
account records, while credit held jointly will be reported in a
joint record.
When analyzing credit, particular attention is
paid to the most recent 24-month period. More weight will be
placed on recent derogatory credit, especially late payments on
either existing mortgage or installment loan debt. Past
bankruptcies must have been discharged for at least two years. If
you have had a past bankruptcy, you should be prepared to document
the reasons for the bankruptcy and also be able to provide discharge
papers. You must have re-established excellent credit for the most
recent 24-month period.
In addition to past credit history,
Lenders have been paying particular attention to the credit score
assigned to your credit record. Credit scores are snapshots that
objectively assess your credit history and current usage at a given
point in time. Each credit score is a reflection of the
unique set of data on your credit file. The credit score
measures the relative degree of risk that your credit profile
presents to Home Owners Made Easy. |
Determining the
property’s value
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Since the only collateral for the mortgage loan
is the property itself, it is very important that during the
approval processes the value of the property is determined.
An appraiser is an individual who is hired to inspect the property
and compare property values in the neighborhood to determine the
value of the property. This process is called appraising the
property.
When purchasing a property, you should be aware of
the values of the homes in the immediate neighborhood. Much
of the property’s value is based not only on its condition, but also
on the properties selling in the neighborhood in the past 6
months. Beware of properties selling at a purchase price
extremely higher than neighboring properties. This could
create a problem when determining the actual appraised value of the
property.
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An Equal Housing Opportunity Lender |
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