The Loan Process

Why Get Pre-Approved?

The first thing you need to do is get pre-approved. This is different from Pre-qualifying, as it is a full loan approval instead of simply an opinion letter. It is best that you take this step before looking at homes. Finding out what you qualify for will help you look in the right price range. You would be disappointed if you found a home you liked and then found you couldn't qualify for it. By the same token you may be able to look at more expensive homes than you originally thought possible. Getting pre-approved will help you in the following ways:

Determine How Much Home You Can Afford
Princeton Capital can determine your purchasing power, which gives you a guideline as to how much home you can afford – before you start looking. We will show you a variety of different types of financing (Fixed Rate, Adjustable, Interest Only, and 100% Financing), and will determine how much you qualify for with each of those types. Based on your desired payment level and type of financing with which you feel comfortable, we can determine your purchasing power.

Know What Your Down Payment Will Be and Provide Financing Options
You need to choose a home based on how much money you have available. Based on the funds you have available, we will design a loan that will work for your individual situation.

Know What Your Monthly Payment Will Be
Before picking a price range, you should make sure that you can handle your total monthly payment: Principal, Interest, Taxes, Insurance (Mortgage Insurance and HOA dues, if necessary).

Turns You Into a Cash Buyer
In today's market, buyers are not the only parties concerned about financing. Sellers are equally concerned. In cases where there are multiple offers for homes, the buyers must put themselves in the best possible position to have their offers accepted. Getting pre-approved also puts the buyer into a better negotiating position, as the seller knows the buyer is ready, willing, and able to buy, and the financing is not in question. Those buyers who are not pre-approved will have less chance of obtaining an accepted offer on the house they wish to buy, and are therefore at a disadvantage.

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What to Expect in the Loan Process

The Application (can be taken via phone)
The key to the loan process going smoothly is the initial application interview. At this time, your Loan Officer obtains all pertinent documentation, orders the initial credit report and inputs everything into their laptop computer so unnecessary problems and delays may be avoided.

2.) Ordering Documentation
Within 24 hours of application, the Loan Officer requests verifications of employment and funds to close, mortgage or landlord ratings, and any other necessary supporting documentation. The Loan Officer also sends the application and all pertinent information to the Loan Processor electronically. Once in contract, the LO collects the purchase contract, preliminary title report , and orders the property appraisal.

Good Faith Estimate and Truth-in-Lending Disclosures
Princeton Capital is required by the government to supply you with a Good Faith Estimate and Truth-in-Lending Disclosures within 3 days of application.

Loan Submission
Once all the necessary documentation is in, the Loan Processor puts the loan package together and submits it to the underwriter for approval.

Awaiting Documentation
Within a week, Princeton Capital begins to receive the supporting documentation. As it comes in, the lender checks for any problems that might arise and requests any additional items needed.

Loan Approval
Loan approval generally takes anywhere from 24 hours to 15 days depending on the complexity of the loan application. All parties are notified of the approval and any loan conditions that must be received before the loan can close.

Documents are Drawn
Within 1 to 3 days after the loan approval, the loan documents (including the note and deed of trust) are completed and sent to the title company. The escrow officer calls the borrowers to come in when the papers are ready for final signature. At this time, the borrowers are provided with final figures regarding how much money they will need to bring in to close the loan.

Funding
Once all parties have signed the loan documents, they are returned to the lender who will review the package. If all the forms have been properly executed, the funds are transferred by wire.

Recordation
When the Title Company receives the funding check from the lender, they make the lender's security for the loan a matter of public record. They do this by recording the deed of trust at the county recorder's office. All proceeds are distributed to the involved parties, and escrow is officially closed. You get the keys to your home!

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The Underwriter Reviews Your Loan

When your loan package is submitted for approval, an underwriter will review the following information to determine whether or not the loan should be approved:

1.) Credit
It is important that credit has been established with a good payment history. Outstanding collection accounts, judgments, or liens must be paid through escrow. The credit report will also list a credit score – a mathematical calculation of your overall credit rating.

2.) Job Stability
A consistent job history with the same company is ideal; however if changes have been made for advancement, it is acceptable. Schooling completed in preparation for a specific vocation is considered to be a part of the job history.

3.) Income and Ratios
Your gross monthly income (before taxes) is computed. Bonuses, overtime, part-time, or self-employment income must be likely to continue and is averaged over the last two years. The principal, interest, taxes, and insurance (P.I.T.I.) on the new loan (plus HOA dues & Mortgage Insurance, if applicable) is divided by the gross monthly income to get the "top" ratio. P.I.T.I. and all debts are added together and divided by the income to get the "bottom" ratio. Ratios are ideally 33 over 38 for an 80% loan, and lower for 90%, 95%, or 97% loans. If other components are strong, higher ratios may be permitted.
P.I.T.I / GROSS MONTHLY INCOME = TOP RATIO
TOTAL DEBT / GROSS MONTHLY INCOME = BOTTOM RATIO

4.) Down Payment, Closing Costs, and Cash Reserves
To be considered "your money", funds must have been verified as having been yours for 3 months. A minimum of a 5% down payment MUST be from your own funds; however, the remainder of the down payment, closing costs, and the 2 to 3 months' cash reserves may be gifted by a relative who provides a letter and bank statement showing the ability to give.

5.) Property
The property is the security for the loan. The lender will require an appraisal by a certified fee appraiser to assure that there is sufficient collateral. The underwriter will review the appraisal to verify the marketability, condition, and value of your home. The lender will also review the title report and require title insurance on the property for your protection as well as theirs.

* If you do not fall within these guidelines, don't panic. We work with various investors that offer loan products that could fit your needs.

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