The Process of Getting a Loan
Once all the required documentation has been gathered, the loan officer will submit your loan application to underwriting. Underwriting is the process of reviewing all of the information and making a decision as to whether a borrower qualifies for a loan. Underwriters evaluate your ability to repay the loan (income), your repayment history (credit) and the value of the property that you've identified (collateral). The lender will make every effort to help qualified borrowers achieve their home financing goals.
In deciding whether to approve a loan, the underwriter reviews the following information:
Loan application. The information provided on your application helps the lender answer basic questions such as:
- What is the source of your income, and is the source stable?
- Is your income adequate to cover the expense of the new mortgage payment?
- How much long-term debt (debt that will not be paid within the next ten months) do you have?
- Are there enough assets to cover the down payment, closing costs and other expenses?
Credit history. Your credit history helps lenders evaluate your ability to manage debt. It reflects how repayment of your bills has been handled in the past.
Property appraisal. An appraisal provides an estimate of the market value of the home and is based on similar homes sold in the neighborhood. Lenders usually grant up to a certain percentage of the property's value in a mortgage loan. This percentage is called the loan-to-value (LTV) ratio. The rest of the property value is covered by your down payment.