Obtain a New Loan

Before We Get Too Far…

Do you know how much home you can afford? Too often, potential buyers begin their home search before establishing a budget — and that’s a mistake. The best strategy is to begin with a plan before you start looking for that amazing property on which to make an offer. Talk with your lender first before you start searching for a home. We recommend Tom Miner at MidFirst Bank, (602) 920-9988.

Qualifying for a Home Loan

Once you’ve established your budget, it’s time to talk to a mortgage professional. Various types of loans exist, including fixed, adjustable, and interest only, and there are many different ways to get into a loan, from a traditional upfront investment to financing the entire transaction. As you review your budget and how much to spend, use the general rule that a mortgage should not exceed 33% of your gross monthly income. The mortgage payment will include principal and interest (depending on the type of loan), as well as property taxes and insurance, or PITI (principal, interest, taxes, and insurance). Depending on where you buy, your monthly budget should also take into account homeowner association dues and perhaps private mortgage insurance (PMI).

To determine what your rough numbers may look like, plug your budget into a basic mortgage calculation formula as indicated below.

Qualifying Ratios

Mortgage professionals and lenders typically use one of two formulas to determine what you can afford, although most require that you meet both of them. The first compares income to housing costs, and the second includes all debts.

With the 33% formula, lenders look at the total monthly housing costs (PITI) to ensure that it is 33% or less of your gross monthly income.

With the 43% formula, lenders calculate the PITI plus all monthly debts to ensure they total 43% or less of your gross monthly income.

As an example, if your family has a gross monthly income of $10,000, you would qualify for a monthly mortgage payment of no more than $3,300 and/or a mortgage payment plus all other monthly debts of not more than $4,300. Naturally, this formula doesn’t take into account your credit score, how much cash you have available for a down payment, or any other factors, so you won’t know how much home you can really afford until you speak to a mortgage profession. Tom Miner at MidFirst Bank is our recommendation, and he welcomes your call at (602) 920-9988.

Loan-Application Process

There are many steps involved in obtaining a loan. Here’s what you can expect.

- - Application
    - Receipt of all documentation required / requested by the lender.
    - Good Faith Estimate of closing costs.
    - Truth-in-Lending.
  - Processing
    - Verification of employment and deposits.
    - Credit report and credit score.
  - Underwriting
    - Clear conditions.
  - Homeowners’ insurance
    - Insurance agent will order a C.L.U.E. report or you can get one from either LexisNexis or Property I.D.
  - Escrow
    - Determine how much money will be needed for closing and how you’ll get it.
    - Schedule appointment for closing.
    - Prepare note and deed of trust.
    - Transfer title following closing.

Application Checklist

When you head to your first appointment with the lender, you’ll need the following items to process your application.

- - Signed copy of purchase agreement
  - Copy of driver’s license
  - Address(es) for prior two years
  - W-2 statements or 1099s for two years
  - Names and contact information of employers for two years
  - Bank statements and proof of assets / investments for two months
  - Individual tax returns and, if appropriate, partnership and corporate tax returns for two years
  - Two-year history of solid mortgage or rent payments, along with loan holder or landlord contact information
  - Application fee

If applicable, you’ll also be asked to provide:

- - Copy of bankruptcy petition or discharge papers
  - Copy of divorce decree or separation agreement with alimony / child support payments made or received