If you’re looking to purchase a home, apartment or condominium in the Los Angeles area, you may need to apply for a mortgage at some point. Whether you’re a first-time home buyer or a seasoned investor, the mortgage approval process can be overwhelming without the help of a professional realtor. At American Dream Realty, we’ve helped hundreds of people navigate through the mortgage and loan approval process so they could purchase their California dream home. In this article, we’ll discuss some popular mortgage approval components so you can be well prepared when it comes time to apply for a loan. If you need assistance purchasing a home near Los Angeles in the Simi Valley or Thousand Oaks area, contact our certified realtors today!
Popular Components of Mortgage Approval
When you apply for a loan, mortgage lenders will approve your loan based on a standard set of guidelines. Below are some popular components of the mortgage approval process.
- Debt-To-Income (DTI) Ratio – A borrower’s DTI Ratio is the measurement of their income to monthly credit and housing liabilities. As a borrower, the lower your DTI ratio, the more confident your lender will be about getting paid on time in the future.
- Loan-To-Value (LTV) – Loan-to-value, also known as LTV, is a common term lenders use when they are comparing the difference between an outstanding loan amount and a property’s value. Certain loan programs will require the borrower to invest a larger down payment in order to avoid mortgage insurance. On the other hand, some government loan programs were created to help buyers secure financing on homes with 96.5- to 100-percent LTV ratios.
- Credit Score – Credit scores and spending history are used by lenders to determine the estimated risk associated with the borrower. Most lenders prefer to see multiple open lines of credit with a minimum of 24 months of reporting history.
- Property Types – The type of property you wish to purchase, along with how you plan on occupying the residence, will play a large role in securing mortgage financing. Due to things like HOA restrictions, government lending mortgage insurance requirements, and appraisal policies, a certified real estate agent should be well-versed in the details of your pre-approval letter before placing any offers on homes.
- Mortgage Program – There are a variety of mortgage programs available for homebuyers in California. From government-insured loan programs to low down payment options, a mortgage professional will be able to help you find the best mortgage program for your unique needs and finances.
At American Dream Realty, our real estate agents offer specialized mortgage and lending services with no upfront costs and competitive interest rates. If you have any questions regarding mortgages in the California real estate market, contact our home buying and lending professionals today!
Pre-Qualification Letters For Your Home Loan
Before you start researching the best California neighborhoods to purchase a home, it’s important to get a mortgage qualification letter. A pre-approval letter gives the seller and real estate agents involved a better sense of security and confidence that your purchase contract will be able to close on time. The pre-approval letter is often issued by a loan officer after your credit history, income, and asset information has been pulled. A mortgage approval letter, on the other hand, is a bit more detailed.
Often issued by the underwriter after a loan package has been submitted, a mortgage approval letter offers a variety of information. In addition to borrower related conditions, there may be inspection clarifications and purchase contract updates included in your mortgage approval letter.
What Is Included In Your Pre-Qualification Letter?
Your pre-approval letter for a new home lets the borrower know the exact terms of your loan amount including down payment requirements, monthly payments, and even insurance. When it comes to looking for financing, it’s important to note that there can be a difference between what you qualify for and what is in your comfortable budget. A few important things that your pre-qualification letter should include are:
The Loan Amount – Your pre-qualification letter should outline the exact loan amount that you qualify for.
Statues Date & Expiration Date – A majority of pre-approval letters are only good for 90 days from the time your credit report was run.
- Mortgage Type – While there are many varieties of mortgage types available for California homebuyers, some of the most popular include FHA, USDA, and VA loans.
- Term – The term of your loan can range anywhere between 40, 30, 20, or 15 years. Depending on the type of loan you choose, your payments may be fixed or adjustable.
Why Do I Need A Pre-Approval Letter?
If you’re wondering why you need a pre-approval letter to purchase a California home, the realtors at American Dream Realty are here to clear things up. A pre-approval letter can help you get your foot in the California home of your dreams by giving your lender a brief history of your financial situation. If you’re looking to acquire a loan from a large bank, they may require you to get a pre-approval letter from their preferred lender.
If you have any questions regarding the pre-approval or mortgage process in California, contact the lending professionals at American Dream Realty today. Our certified real estate agents have more than 17 years of experience in the California real estate market and we can help you find a loan program that works with your budget. Contact us today to learn more!