Emery Federal Credit Union

Step 1. Is this loan for purchasing a new home? If it isn’t, proceed to Step 2. If it is, before you find a home, you need to find out how much you can borrow.
The first step in obtaining a purchase loan is to determine how much money you can borrow. In the case of buying a home, you should determine how much home you can afford even before you begin looking at possible properties. By answering a few simple questions, we will calculate your buying power, based on standard lender guidelines.

It is definitely recommended that you get pre-qualified before you start looking for your new house so you can:

LTV and Debt-to-Income Ratios
LTV or Loan-To-Value ratio is a ratio used to calculate the amount of a loan balance, as opposed to the value of the client’s home. Lenders are usually prepared to lend a higher percentage of the value, even up to 100%, to certain creditworthy borrowers. Another consideration in approving the maximum amount of loan for a particular borrower is the ratio of monthly debt payments (such as home, auto and personal loans) to income. Rule of thumb states that your monthly mortgage payments should not exceed 25-30% of your gross monthly income.

FICO Credit Score
FICO Credit Scores are widely used by almost all types of lenders in their credit decision. It is a quantified measure of creditworthiness of an individual, which is derived from mathematical models developed by Fair Isaac and Company in San Rafael, California. FICO scores reflect credit risk of the individual in comparison with that of general population. It is based on a number of factors including past payment history, total amount of borrowing, length of credit history, search for new credit, and type of credit established. When you begin shopping around for a new credit card, personal or auto loan, every time a bank or other institution runs your credit report it adversely affects your credit score.

Self-Employed Clients
Self-employed individuals often find that there are greater hurdles to borrowing for them than a person employed through a company. For many conventional lenders the problem with lending to the self-employed is documenting an applicant's income. Applicants with jobs can provide lenders with pay stubs and W2 forms, and lenders can verify the information through their employer. In the absence of such verifiable employment records, lenders rely largely on income tax returns, which typically are required for the previous 2 years.

Source of Down Payment
Lenders expect borrowers to come up with sufficient funds for any sort of down payment payable on a home loan by the borrower at the time of funding the loan. It is generally expected that these funds be borrower's own savings or checking account, although a borrower may receive non-returnable gifts from family members in certain cases.

Step 2. Select the right loan program
Home loans come in many shapes and sizes. Deciding which loan makes the most sense for your financial situation and goals means understanding the benefits of each. Whether you are buying a home or refinancing, there are 2 basic types of home loans. Each has different reasons you would choose them.

1) Fixed Rate Mortgage
Fixed rate mortgages usually have terms lasting 10, 15, 20, 25 or 30 years. Throughout those years, the interest rate and monthly payments will always remain the same. You would select this type of loan when you:

2) Adjustable Rate Mortgage
Adjustable Rate Mortgages (often called ARMs) typically last for 30 years, just like some fixed rate mortgages. But during those years, the interest rate on the loan may go up or down, after the initial fixed-rate period. Monthly payments also can increase or decrease, after the initial fixed rate period. You would select this type of loan when you:

Plan to stay in your home less than 5-7 years
Don't mind having your monthly payment periodically change (up or down)
Comfortable with the risk of possible rate increases or decreases in the future
Think your income will probably increase significantly in the future

By carefully considering the above factors and seeking our professional advice, you should be able to select the one loan that matches your present condition as well as your future financial goals.

Step 4. Begin loan processing and underwriting
Although lenders conform to standards set by government agencies, loan approval guidelines vary depending on the terms of each loan. In general, approval is based on two factors: your ability and willingness to repay the loan and the value of the property.

Once your loan application has been received we will start the loan approval process immediately. Your loan processor will verify all of the information you have given. If any discrepancies are found, either the processor or your loan officer will troubleshoot to straighten them out. This information includes:

Income/Employment Check
Is your income sufficient to cover monthly payments? Industry guidelines are used to evaluate your income and your debts.
Credit Check
What is your ability to repay debts when due? Your credit report is reviewed to determine the type and terms of previous loans. Any lapses or delays in payment are considered and must be explained.
Asset Evaluation
Do you have the funds necessary to make the down payment (if necessary) and have enough reserves left in the bank?
Property Appraisal
Is there sufficient value in the property? The property is appraised to determine market value. Location and zoning play a part in the evaluation.
Other Documentation
In some cases, additional documentation might be required before making a final determination regarding your loan approval.

In order to improve your chances of getting a loan approval:

In order to improve your chances of getting a loan approval, follow these steps:

1. Fill out your loan application completely. You may use our online form to expedite the process.

2. Respond promptly to any requests for additional documentation, especially if your rate is locked or if your loan is to close by a certain date.

3. Do not move money into or from your bank accounts without a paper trail. If you are receiving money from family or other relatives, please prepare a gift letter and contact us.

4. Do not make any major purchases until your loan is closed. Purchases cause your debts to increase and might have an adverse affect on your current application.

5. Do not go out of town around your loan's closing date. If you plan to be out of town, sign a Power of Attorney to authorize another individual to sign on your behalf when your loan is expected to close.

Step 5. Close your loan
After your loan is fully approved, you are ready to sign the final loan documents. You must review the documents at the closing, and make sure that the interest rate and loan terms are what you were promised. Also, verify that the name and address on the loan documents are accurate. The signing normally takes place in front of a notary public.

Your loan will normally fund shortly after you have signed the loan documents. On refinance and home equity loan transactions, federal law requires that you have 3 days, as a right of recission, to review the documents before your loan transaction can fund.