Guild Mortgage’s Michigan Mortgage Approval Process
Whether you’re a First-Time Home Buyer or seasoned investor, the mortgage approval process can be a slightly overwhelming adventure without a proper road map and good team in your corner.
With the Michigan Guild Mortgage Team at the helm of the process, we will ensure that your mortgage approval process is as smooth as possible and is conducted in accordance with our commitment to transparency. We will get to know you and your goals, understand what’s important to you, and fit you with the right product.
In order to be as transparent as possible, we do like to empower our clients with a fundamental understanding of what to expect. While much of this is communicated while we’re working together, the following information is designed to give a frame of reference for important concepts and milestones in the mortgage process.
Updated program guidelines, mortgage rate questions, and down payment requirements are a few of the components you’ll need to be aware of when getting mortgage financing for a purchase or refinance.
While this site is full of useful information, industry terms and calculators that will help you research the mortgage approval process in detail, this particular page was designed to give you a thorough outline of the important components involved in getting qualified for a new mortgage loan.
Mortgage Approval Components:
Mortgage lenders approve borrowers for a loan, which is secured by real estate, based on a standard set of guidelines that are generally determined by the type of loan program.
The following bullets are the main components of a mortgage approval:
Debt-To-Income (DTI) Ratio –
A borrower’s DTI Ratio is a measurement of their income to monthly credit and housing liabilities.
The lower the DTI ratio a borrower has (more income in relation to monthly credit payments), the more confident the lender is about getting paid on time in the future based on the loan terms.
Loan-to-Value (LTV) –
Loan-to-Value, or LTV, is a term lenders use when comparing the difference between the outstanding loan amount and a property’s value.
Certain loan programs require a borrower to invest a larger down payment to avoid mortgage insurance, while some government loan programs were created to help buyers secure financing on a home with 96.5% to 100% LTV Ratios.
EX: A Conventional Loan requires the borrower to purchase mortgage insurance when the LTV is greater than 80%. To avoid having to pay mortgage insurance, the borrower would have to put 20% down on the purchase of a new property. On a $100,000 purchase price, 20% down would equal $20,000.
Credit scores and history are used by lenders as a tool to determine the estimated risk associated with a borrower.
While lenders like to see multiple open lines of credit with a minimum of 24 months reporting history, some loan programs allow borrowers to use alternative forms of credit to qualify for a loan.
Property Types –
The type of property, and how you plan on occupying the residence, plays a major role in securing mortgage financing.
Due to some HOA restrictions, government lending mortgage insurance requirements and appraisal policies, it is important that your real estate agent understands the exact details and restrictions of your pre-approval letter before placing any offers on properties.
Mortgage Programs –
Whether you’re looking for 100% financing, low down payment options or want to roll the costs of upgrades into a rehab loan, each mortgage program has its own qualifying guidelines.
There are government-insured loan programs, such as FHA, USDA and VA home loans, as well as conventional and jumbo financing.
A mortgage professional will take into consideration your individual LTV, DTI, Credit and Property Type scenario to determine which loan program best fits your needs and goals.
The Importance of Pre-Approval
In the current Michigan real estate market, where competitive bidding is rampant, walking in without a pre-approval letter is like turning up with a knife at a gun-fight. You might win, but you’d better hope lady luck is on your side!
Other mortgage companies may issue you a “pre-qualification” letter that is simple and quick to obtain but is nowhere near as confidence-inspiring from the sellers standpoint as a Pre-Approval letter. At Guild Mortgage, we front-load the work to give you the BEST odds of winning your bid, and not leaving anything on the table.
Guild Mortgage Michigan Mortgage Pre-Approval Program Benefits:
We do all the financial due diligence up front, including income verification, analysis of debt load, and credit history review and verification. If we say you’re Pre-Approved, you’re REALLY pre-approved. Why don’t other lenders do so much legwork on the front end? We don’t know, but a pre-qualification letter some lenders write often isn’t worth the paper it’s written on when it comes time to close. By contrast, our PreApproval program ensures a no-surprises closing on your dream home.
- We customize property-specific letters – FAST – so that all your prospective sellers see is the amount you’re offering. Think about it. If they see a higher approval amount on a generic pre-approval letter, will they necessarily accept your offer, or sign back for more?
- We give you the FULL payment detail involved in purchasing the home on which you’re making the offer so that you know exactly what to expect in terms of payments and closing costs.
- We can help you strategically determine your best offer. In some cases, it makes sense to include seller concessions, whereby the seller pays for up to 6% of your closing costs.
For more information on the approval process, visit our FAQ Section.