Loan Process Steps

Step 1: Find Out How Much You Can Borrow

The first step in obtaining a loan is determining how much money you can borrow. When buying a home, it’s essential to understand how much house you can afford before you start your search. By answering a few simple questions, we can calculate your buying power based on standard lender guidelines.

Pre-Approval Process

Getting pre-approved for a loan involves verifying your income, credit, assets, and liabilities. It’s recommended to get pre-approved before house hunting because:

  • Stay Within Budget: You’ll know the price range of properties you can afford.
  • Stronger Negotiation Position: Sellers will recognize that your loan is already approved.
  • Faster Closing: Pre-approval can speed up the loan closing process.

Key Factors in Borrowing Capacity

Loan-to-Value (LTV) and Debt-to-Income Ratios

  • LTV Ratio: This is the maximum amount a lender is willing to finance relative to the property value. Lenders may finance up to 100% for creditworthy borrowers.
  • Debt-to-Income Ratio: This compares your monthly debt payments to your income. Ideally, your mortgage payments should not exceed one-third of your gross monthly income. High debt-to-income ratios might require a larger down payment to qualify for a lower LTV ratio.

FICO™ Credit Score

  • Creditworthiness Measure: FICO™ scores, created by Fair Isaac and Company, assess your credit risk compared to the general population. Factors include payment history, total borrowing, credit history length, new credit inquiries, and types of credit.
  • Impact of Inquiries: Each credit check by a lender can lower your score slightly. Authorize credit checks only when you’re ready to apply for a loan.

Self-Employed Borrowers

  • Income Documentation: Self-employed individuals face more challenges in proving income. Lenders require two years of income tax returns, as pay stubs are not available.

Source of Down Payment

  • Saving for Down Payment: Lenders expect borrowers to have enough saved for the down payment and other fees. If you lack the required funds, you may receive gift funds from an acceptable donor, with a signed letter stating that repayment is not required.


Determining your borrowing capacity involves understanding your financial situation, getting pre-approved, and considering factors like LTV ratios, credit scores, and down payment sources. This step is crucial for a smooth home-buying process and ensures you look for properties within your budget.

For more detailed information, consult with your lender or visit resources like the Consumer Financial Protection Bureau (CFPB) to understand the loan process better.

Step 2: Selecting The Right Loan Program

Choosing the right home loan program is essential for aligning with your financial situation and goals. Whether buying a home or refinancing, understanding the benefits of each loan type can help you make an informed decision. There are two basic types of home loans, each with distinct reasons for selection.

Fixed Rate Mortgage

Fixed rate mortgages usually have terms lasting 15 or 30 years. The interest rate and monthly payments remain the same throughout the loan term. You might choose this type of loan if you:

  • Plan to Live Long-Term: If you plan to live in the home for more than 7 years, the stability of fixed payments can be beneficial.
  • Prefer Stability: You like the predictability of a fixed principal and interest payment, which helps with budgeting.
  • Avoid Payment Increases: You don’t want to risk future increases in your monthly payments.
  • Stable Financial Situation: You expect your income and spending to stay relatively the same over the years.

Adjustable Rate Mortgage (ARM)

Adjustable Rate Mortgages (ARMs) typically also have terms of 15 or 30 years, but the interest rate can fluctuate based on market conditions. Monthly payments can increase or decrease over time. You might choose this type of loan if you:

  • Short-Term Plan: Plan to stay in your home for less than 5 years. The initial lower interest rate can save money in the short term.
  • Comfort with Change: Are comfortable with your monthly payments changing periodically, which could mean lower payments initially but potential increases later.
  • Income Growth: Expect your income to increase in the future, making you more capable of handling possible payment increases.

Making the Right Choice

By carefully considering these factors and seeking professional advice, you can select a loan that matches both your current situation and future financial goals. Each loan type has its advantages, and the right choice depends on your long-term plans and financial stability.

For more information on fixed-rate and adjustable-rate mortgages, you can consult resources like the Consumer Financial Protection Bureau (CFPB) or talk to a mortgage advisor.

Step 3: Apply For Your Loan

Applying for a loan with Gate City Mortgage Company is a straightforward process designed to get you into your new home as smoothly as possible. Our team of experts is here to guide you through every step, ensuring you get the best loan terms for your needs.

Contact Us

We encourage you to reach out to us directly to begin your loan application process. You can contact Gate City Mortgage Company via phone at 603-801-5641 or use our Contact Form to get in touch with us. We pride ourselves on our responsiveness and commitment to excellent customer service, so we will get back to you within two business days.

Why Choose Gate City Mortgage Company?

  • Knowledgeable Team: Our experienced professionals are well-versed in the mortgage industry and are ready to help you navigate the complexities of securing a home loan.
  • Personalized Service: We take the time to understand your unique financial situation and goals, ensuring you receive the best advice and loan options tailored to your needs.
  • Quick Response Time: We value your time and aim to make the loan application process as efficient as possible, getting back to you promptly with the information and assistance you need.

By choosing Gate City Mortgage Company, you are opting for a partner dedicated to making your home buying journey as smooth and successful as possible. Reach out to us today, and let us help you secure the home of your dreams.

Step 4: Begin Loan Processing

Once we have your loan application, the loan approval process begins immediately. Each lender follows guidelines set by government agencies, but the specific approval criteria can vary based on the loan terms. Generally, loan approval is based on your ability and willingness to repay the loan and the property’s value.

Verification Process

Your loan processor will verify all the information provided in your application. If any discrepancies are found, the processor or your loan officer will work to resolve them. Here’s what we check:

  • Income/Employment Check: We ensure your income is sufficient to cover the monthly payments, using industry guidelines to evaluate your income and debts.
  • Credit Check: We review your credit report to assess your ability to repay debts. This includes evaluating the type and terms of previous loans and explaining any lapses or delays in payments.
  • Asset Evaluation: We verify that you have the necessary funds for the down payment and closing costs.
  • Property Appraisal: We appraise the property to determine its market value, considering factors like location and zoning.
  • Other Documentation: Additional documentation might be required in some cases before making a final loan approval decision.

Tips to Improve Loan Approval Chances

  • Complete Application: Fill out your loan application thoroughly. Using our online forms can help expedite the process.
  • Respond Promptly: Quickly respond to any requests for additional documentation, especially if your rate is locked or if your loan is set to close by a certain date.
  • Maintain Bank Account Integrity: Avoid moving money in or out of your bank accounts without proper documentation. If you receive money from friends or family, prepare a gift letter and inform us.
  • Delay Major Purchases: Refrain from making major purchases until your loan is closed, as they can increase your debt and negatively impact your application.
  • Stay Available: Avoid traveling around your loan’s closing date. If you must be out of town, consider signing a Power of Attorney.

By following these guidelines and staying in close communication with your loan processor, you can help ensure a smooth and timely loan approval process. If you have any questions or need assistance, don’t hesitate to call or contact Gate City Mortgage Company.

Step 5: Close Your Loan

After your loan is approved, you’re ready to sign the final loan documents. It’s crucial to review these documents carefully before signing to ensure the interest rate and loan terms match what you were promised. Also, check that your name and address are correctly listed. The signing typically takes place in front of a notary public.

Closing Day Checklist

  • Review Documents: Ensure all details, including the interest rate, loan terms, name, and address, are accurate.
  • Associated Fees: Be prepared to pay various fees related to obtaining the mortgage and transferring property ownership.
  • Cashier’s Check: Bring a cashier’s check for the down payment and closing costs, as personal checks are usually not accepted.
  • Insurance Proof: Provide your homeowner’s insurance policy and any other required insurance, such as flood insurance, along with proof of payment.

Post-Signing Process

Once you sign the loan documents, your loan will typically close shortly thereafter. For owner-occupied refinance loan transactions, federal law requires a three-day review period before the loan can officially close. This period allows you to review the documents thoroughly.


Closing your loan involves a few critical steps to ensure everything is in order. Reviewing your loan documents, paying the necessary fees, and providing proof of insurance are essential to finalizing your mortgage. Once completed, your loan will close, and you’ll be ready to take ownership of your new home.

For more detailed information on the closing process, you can consult resources like the Consumer Financial Protection Bureau (CFPB) or speak with Gate City Mortgage Company.