Pre-Qualifying for a Loan vs. Loan Pre-Approval

Getting a mortgage usually involves getting pre-qualified or pre-approved for a loan at some stage in the process. Although pre-qualification and pre-approval are both stepping

Pre-Qualifying for a Loan vs. Loan Pre-Approval

stones to securing a home loan, they are actually quite different, and it’s important to understand the difference between the two. They require different types of information, offer different types of benefits, and are useful in different situations.

Knowing whether you should seek pre-qualification or pre-approval for a loan can make the difference between sealing the deal on your dream home or losing it to another buyer. So read on to understand what both processes entail.

What is Pre-Qualification?

Pre-qualification is often the first step of the mortgage process. When lenders pre-qualify you, they take unverified information about your current financial situation in order to tell you how much you’ll likely be approved for. While some sellers may not take your bid very seriously with pre-qualification, it can be a great starting place and a reality check for you as you get ready to buy a home.

What Documents are Required for Pre-Qualification?

To receive pre-qualification for a loan, you’ll need to provide a lender with some basic information about your finances. The lender will request figures to assess how much you earn on a regular basis, understand what kinds of assets you have, and see how much debt you’ve already accrued.

After you provide these answers, the lender will take this unverified information and use it to determine how much you’re likely to be approved for should you apply for a loan. Since this process is relatively informal, pre-qualifying for a mortgage does not guarantee that you will ultimately be approved for a mortgage for that same amount.

What are the Benefits of Pre-Qualification?

As you can see, pre-qualification is basically a quick and simple estimate of how much you can afford based on your current financials. However, pre-qualifying doesn’t guarantee you’ll get approved for that amount. So why bother getting a loan pre-qualification if it’s not guaranteed?

Here are a few reasons to go ahead with pre-qualification:

  1. It’s a great tool for first-time homebuyers. If you have no idea where to start with getting a mortgage, pre-qualification can be quite illuminating. It will show you what lenders will be concerned with and give you a small taste of what the mortgage application process will be like. This experience can be valuable in terms of helping you prepare for securing your home loan. Pre-qualification will show you if you’re able to support a mortgage, and how much you can comfortably afford.
  2. It helps you estimate what you can afford. Taking a look at your current financial state is important for determining what you can afford. Knowing how much you’ll likely be able to borrow for a new home will determine what your final budget is, and that bottom-line will help you narrow your search for new homes within your budget. Having an idea of what you can expect to pay each month will let you plan for upcoming expenses. If you currently rent, you will be able to see how buying a house will impact your monthly expenses so that you can begin to prepare for your next steps.
  3. It doesn’t impact your credit score. Pre-qualification is a way to get an idea of what you can expect to get from a mortgage. Since it doesn’t guarantee your final outcome, no hard pull of your credit report is required. If you’re not quite ready to pull the trigger on the purchase of a new home, this is important. Each time a lender pulls your credit report, it can negatively impact your credit score by about five points. You want your credit report to be in the best shape possible, and all those five-point dings can sink your score. The higher your score, the better mortgage terms you’ll be able to access, especially when it comes to interest rates.
  4. It doesn’t cost you anything. Sure, you’ll need to spend some time with a mortgage lender or broker to complete the pre-qualification process, but they won’t charge you any fees to do this. It’s a service that prepares you both for what steps to take down the line, so don’t expect that you’ll need to pay for anything just yet.

How do you Pre-Qualify for a Mortgage Loan?

Speak to your mortgage lender and request to be pre-qualified for a mortgage loan. They’ll ask for information about your income, assets, and debts to get a picture of your current state of finances. Then they’ll tell you how much you’ll pre-qualify for.

What is Mortgage Pre-Approval?

Getting pre-approved for a mortgage goes a step beyond pre-qualification in that you need to submit verifiable proof of income, debts, and assets to get approved for a specific loan amount. There are still no absolute guarantees that you’ll be approved for that amount, but it’s more likely than with pre-qualification. To obtain pre-approval, lenders won’t just take your word for it. They’ll require that you show proof and give you a more specific loan amount.

What Documents are Required for Pre-Approval?

Your lender will request your financial information in the form of pay stubs, bank statements, obligations, tax returns and your credit report. Upon receipt, the lender will review and verify each piece to give you an accurate loan pre-approval amount.

What are the Benefits of Loan Pre-Approval?

Sellers love getting offers from pre-approved buyers. In fact, if you’re involved in a bidding war against other buyers who are not this far along in the mortgage process, the seller may choose the pre-approved buyer, even if that bid is slightly lower than a competing bid without pre-approval. Here are some of the other benefits of pre-approval:

  1. It speeds up the closing process. Closing on a mortgage that you’ve already been pre-approved for is a lot faster. Since the lender has verified your current documents, they’ll only need to be brought current and taken with information about the property that you’re buying in order to close quickly.
  2. It gives you negotiating power. Sellers will take your offer seriously when you have a pre-approval in hand. This shows that your money is together and that you are ready to move and close on their property quickly.
  3. It shows you know exactly how much you can afford. Giving verified documentation to your lenders entitles you to a more specific pre-approved loan amount. Though the final number may vary if some piece of your financial situation changes, it gives you a more concrete idea of what you can spend on a new home and what you’ll need to pay each month. You’ll even get an estimate of what you can expect that your down payment and closing costs will be.
  4. There are no fees for loan pre-approval. Pre-approval is just another step on the journey towards securing your mortgage. It’s essentially like a dress rehearsal for the real thing.

How do you get Pre-Approval for a Mortgage Loan?

Contact your lender for mortgage loan pre-approval. They’ll request that you transmit copies of the required documents through a secure portal. Once they receive your information, they’ll review what you’ve sent and verify it. If your lender needs more information or an explanation from you, they’ll ask. When your lender is ready to pre-approve you, they’ll let you know what mortgage terms you can expect if you were ready to apply right now. Getting an online pre-approval is pretty straightforward and can often be accomplished in one day if you have all of your documents handy.

Additional Read: Mortgage Pre-Approval Tips

How to Determine the Right Choice for You

The main distinction for pre-qualification and pre-approval is that they are helpful at different times of your home buying process. If you’re just starting the home buying process, pre-qualification is a great way to get an idea of what you should expect. Without the credit impact and verified information required for pre-approval, pre-qualification will help to save you time by narrowing your housing search to what you’ll likely be able to afford and by preparing you for other steps of the mortgage application process.

If you plan to purchase a home within 90 days, get pre-approved. Mortgage pre-approval is imperative if you’re looking to buy a home in a hot housing market as they often sell quickly and you want to be prepared to take swift action. Since sellers appreciate buyers with pre-approvals in hand, your offer will stand out in a bidding war and you will be able to close more quickly than you would without one.

Reach Out to A and N Mortgage

Whether you’re ready to embark on your home buying journey with mortgage pre-qualification or prepared to obtain mortgage loan pre-approval, contact the professionals at A and N Mortgage. They work with the best mortgage bank in Chicago to help you get pre-qualified or pre-approved for your dream home and their decades of experience will help guide you through these processes as easily and quickly as possible.


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How to Become A Loan Officer

Navigating the challenges of obtaining a mortgage for a dream home can be a daunting experience. A licensed loan officer helps to alleviate those challenges by guiding their clients through the financial process while also educating them about the best possible options. 

If you want to learn more about what it takes to become a successful and reputable loan officer then continue reading below for tips and answers to common questions.

What is a Loan Officer?

How to Become A Loan Officer

A loan officer is an individual who works at a financial institution—like a bank, credit union, or lending company—who is responsible for helping clients apply for loans. Loan officers gather information like tax returns, pay stubs, and credit reports to determine how likely people or corporations are to repay a loan. 

What Does a Loan Officer Do?

The loan officer job profile encompasses all parts of the loan application process. These duties include collecting the information required to complete and process an application to make sure that each application is accurate. From there, loan officers are required to analyze the information they’ve received. They will determine if a particular client is creditworthy and under which conditions a loan should be granted to a client. Additionally, it is the loan officer’s responsibility to appraise the client of the application’s status and build trust throughout the process.

Loan officers will typically acquire a specialization, but they’re found in tons of different areas. As mentioned, mortgages are a booming business, but loan officers can also be responsible for car loans, consumer loans, mortgages, and student loans, among other things. Loan officers will advise their clients of the best available loan options and inform them of various requirements to help them navigate the process. 

To keep clients happy, mortgage officers, in particular, must do what it takes to earn and maintain their clients’ trust. It’s not uncommon for mortgage lenders to service the same client through more than one loan process through the years. Clients are happy to refer their friends and family members to their loan officer if they feel that they have been well taken care of by him or her.

What Documentation is Required to Become a Loan Officer?

While it is possible to become a loan officer without a bachelor’s degree, many loan officers do have four-year degrees. If you’re considering a career as a loan officer, studying business-adjacent fields, like finance or accounting, will help prepare you for this type of work.

If a college degree isn’t in the game plan, begin building experience in the industry. Some community colleges offer undergraduate certificate programs specifically for mortgage loan originators. There are also diplomas and certificate programs available from the American Bankers Association American Institute of Banking to prepare you for your work as a loan officer. These certificates cover topics like building customer referrals, ethics, general accounting, personal tax return analysis, the law, and banking. Completing one of these programs will ensure that you know how to properly analyze financial statements, evaluate and structure corporate loans, grow business relationships, and more. 

While the above degrees and certificates will prepare you for what to expect as a loan officer, banks will hire loan officers who have as much as five years of experience or more in a related field, even without a degree. Work in customer service or sales is also beneficial if you choose to take a non-traditional approach to become a loan officer. 


If you decide to become a loan officer, you will also have to obtain a proper license from the NMLS and meet the licensing requirements of the state that you plan to practice in. After undergoing a background check and completing the required education, you will be licensed to grant mortgages in a particular state. It can take a few weeks or months to meet the pre-licensing education requirements and pass the appropriate examinations to obtain loan officer certification.

Each year, you will be required to undergo several hours of continuing education in order to keep your license active. Use the opportunities for continuing education to acquire additional professional certifications. For example, the American Bankers Association offers certificates in Commercial Lending and Residential Mortgage Lending that allows you to sharpen your skills and keep up with the latest rules and regulations.  

What are the Steps to Become a Mortgage Loan Officer?

You’ll need to follow these steps to become a mortgage loan officer:

  1. Register with the NMLS (Nationwide Multistate Licensing System & Registry) here. You’ll receive an NMLS ID when you do. This will enable you to apply for a new license or register for many states in the US.
  2. Use your NMLS ID to create an account. Follow the prompts as directed. If your state regulator or your mortgage company requires it, be prepared to complete and file your Individual (MU4) form with the NMLS before you can proceed. If you are working with a mortgage company like A and N Mortgage, contact them at this point so that they can take the next steps and set up your sponsorship if applicable. Until your sponsorship has been set up by a mortgage company, any individual who completes the NMLS registration process will receive a license that is issued as “approved-inactive,” meaning that all requirements except employment have been met.
  3. After you’ve created your NMLS account and filed your MU4 form, you’ll need to undertake the following components in order to receive your license:
  • Complete 20 hours of approved education. This can be done online or in person. This is a good place to get your required education hours online.
  • Pass a criminal background check and have your fingerprints taken.
  • Submit a credit check.
  • Apply for the appropriate state license.
  • Pay all relevant fees associated with the licensing process. 
  • Schedule and pass the in-person knowledge test of rules and regulations.
  1. Become an expert on mortgage guidelines. A and N Mortgage will help to coach you through this by putting you on a team that will help set you up for success. 
  1. A and N will help fast track your success by giving you practical on-the-job training and business development support.

How to Become a Successful Loan Officer

 To become a successful mortgage officer, it would be wise to form working relationships with real estate developers, builders, and real estate agents who can refer clients to you as you build your client base. Having excellent communication and interpersonal skills can help you become an effective loan officer. You may need to encourage loan applications when interest rates are higher, and applications taper off slightly and may find yourself regularly talking to clients.

As loan officers gain more experience, they are often promoted to positions with greater responsibility. This promotion can be to a management position that requires them to oversee a group of loan officers, or they may be responsible for closing sales and working closely with more prominent clients. These promotions lead to higher commissions from sales.

Eventually, some mortgage loan officers may become independent mortgage brokers. As mortgage brokers, they match the client with the best lender for their needs and earn a commission for making the match. 

Contact A and N Mortgage for Professional Advice

Mortgage loan officers are in exceptionally high demand right now as interest rates are low and the real estate market is red-hot. It takes a particular skill set to navigate people through the process of securing a loan like a mortgage. It can be an arduous and tedious undertaking without a knowledgeable loan officer at the helm.

Whether you go the traditional route of pursuing a four-year degree or obtaining certificates that prepare you for a loan officer’s role or choose to take a non-traditional path by gaining years of experience in a related field, you can eventually find yourself in the position of a loan officer. With the relevant state and local licenses, you will have the power to review loan applications and walk clients through the process of applying for a mortgage.

If you’re willing to earn a client’s trust and work to patiently guide them through the intricacies of the mortgage process, being a successful mortgage loan officer can be a rewarding career. After all of the potentially late nights, mountains of paperwork, and financial analyses that you undertake to determine creditworthiness, you do have a direct impact on a person’s ability to acquire the home of their dreams.

Earning your client’s respect ensures that you complete the loan process with as little discomfort as possible. Since being a mortgage officer is as much about the relationship that you build with your clients, work to understand them, and build trust throughout your interactions. It is through these relationships that you receive referrals and advances your career.

For more information on becoming a licensed mortgage loan officer in Chicago, contact A and N Mortgage. We’re always looking to add dedicated loan officers to our competitive roster of some of the most qualified, hardest-working mortgage loan officers in the Chicago metropolitan area. 


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Mortgage Refinancing Tips for Self-Employed Borrowers

Refinancing your mortgage is a tedious process for most people. Unfortunately, securing a loan as a self-employed borrower will often require that you provide additional documentation to procure your loan if you decide to refinance your property. This common struggle occurs because lenders for self-employed individuals want to make sure that they will be repaid. If you work for yourself, they can’t verify the amount and consistency of your income with your employer as they usually would. 

Thankfully, with adequate preparation and diligent record-keeping, it’s possible to refinance your mortgage while self-employed. Though the process of applying for and securing refinancing of your mortgage is time-consuming and can be fairly intense, it still presents the potential for significant savings over your current mortgage payments, especially as interest rates remain low. Follow these tips and tricks to spare yourself some of the time and hassle of applying for mortgage refinancing as a self-employed individual.

Requirements and Documentation

Refinancing your mortgage while self-employed will look different depending on your situation and your lender. Lenders might set out extra hoops for self-employed people to jump through in the application stage. Be prepared to satisfy other requirements as the loan moves forward. You may need to provide more answers to the lender’s compliance or operations department.

As lenders do for every applicant, they’ll look at your credit score and verify your assets, income, and debt-to-income ratio to determine your credit risk. Under typical circumstances, lenders will examine your tax returns, recent pay stubs, and bank statements to make that assessment. Self-employed mortgage qualifications will require you to provide additional supporting evidence to refinance your mortgage. Expect that these documents will receive greater scrutiny, too.

Freelancers or sole proprietors who own their own business will have to provide supplementary proof of income to satisfy the lender’s requirements. Ultimately, lenders need to be satisfied with answers to the following questions to approve your application:

  • What work do you do, and where do you do it?
  • Is your income stable?
  • How financially secure is your business?
  • Will your business continue to perform at a level that will ensure you can repay your loan?

There are several ways that you can address these questions. Be prepared to show at least an uninterrupted two-year history of self-employment income records. If that’s unavailable, you’ll need to show self-employed activity for at least 12 months in conjunction with previous employment. 

Lenders might ask you for these documents to verify the nature of your employment and complete your application:

  • List of current clients
  • Records from your licensed CPA
  • Membership to a professional organization
  • State or business licenses (including DBA registration)
  • Proof of insurance for your business

To confirm your income, be prepared to provide: 

  • Personal tax returns (including W-2s if you’re paid by your corporation)
  • Bank statements                                                                                                                         
  • Profit/loss forms (depending on the way your business is structured, this may include a Schedule C, Form 1120S, or K-1)

Tips and Tricks

While it can be a time-consuming process to apply for mortgage refinancing while self-employed, there are several steps you can take to help navigate the process more quickly and easily. 

  1. Get organized and keep good records. Expect to hand over lots of information. If you keep good records and know how to access them, this will make the process go smoothly. Once you get a request from your lender, acknowledge it as soon as possible and comply as quickly as possible. Ideally, you want to present as long a history of successful self-employment as possible to assure the lender of your ability to repay the money borrowed. The more thorough and detailed your records are, the better your application will look to the lender.
  2. Watch your credit. While a good score doesn’t guarantee that your application will be approved, it is a crucial component of a successful application. With a higher score, lenders tend to look at your application more favourably, so do what you can to improve your score and keep it high. The higher your credit score is, the lower your interest rate will be.
  3. Keep business expenses separate. Using your personal credit cards to charge business expenses will increase your credit utilization and can hurt your credit score. Go through the effort to open business cards for business expenses to improve your personal credit utilization and give a more truthful and accurate representation of the state of your personal finances.
  4. Keep a handle on your debt-to-income (DTI) ratio. When your DTI is low, it tells the lender that you have the money to pay back whatever you borrow. Consequently, you pose less of credit risk. If your DTI is greater than 50%, look at reducing your outstanding debts to improve your application.
  5. Expect to be Googled. Lenders want to verify the legitimacy of your business, so have a professional website or online presence that shows regular activity. This will be especially important if you are a sole proprietor, or you file your own taxes. You may have to provide additional references of people that you work with if your particular situation calls for that.
  6. Don’t go through the application process alone. Independent tax preparers and accountants can lend additional credibility to the documents that you provide as part of your application. These documents are more valuable to the lender if they have been reviewed and processed by a licensed tax preparer or CPA instead of by yourself. It can also be helpful to have your CPA or tax preparer draft a letter on their own letterhead stating that you’ve been in businesses for however long and that they currently or previously managed this aspect of your business for you.You or your accountant can also prepare a detailed Profit/Loss report. Consulting with your tax preparer can help you make sure you don’t write off too much as you get ready to refinance for self-employed. If there are too many deductions on your taxes, and your income is too low, that raises red flags for lenders, and you may not qualify. Expect that if you amend your taxes to show more income, you’ll need to explain why and prove that you paid taxes on the additional income before your lender will move forward with that information.

    It may be worth the time and effort to do this to present yourself as a more attractive candidate. If you have them, they are an excellent resource for you to use as you put together your application. Informing these professionals that you plan to apply for mortgage refinancing will increase your chances of a successful application, too.

  7. Keep some cash in reserve. With substantial liquidity, you can accomplish several things for your lender. If you want to provide a larger down payment, doing that assures the lender of your skin in the game and makes you a better candidate for financing. Large cash reserves also give lenders added security and can make or break your application. Even if you don’t use it as a down payment, these funds show your lender that you’re prepared to navigate any future uncertainty and that you will still be able to make your monthly mortgage payments. Finally, you may need this cash to cover your closing costs.
  8. Stay the course. Applying for a refinance mortgage as a self-employed borrower can be a hassle. The paperwork and back-and-forth exchange of information is less than ideal, so stay focused on why you’re going through this. Lowering your interest rates can save you hundreds or thousands of dollars off of your current monthly payments. This makes all the effort worthwhile.

Apply Online During Covid-19

Even as we consider how to move forward in an economy that has been gripped by Covid-19, you can still refinance your mortgage by going online. Just as you would while researching a mortgage or refinancing options, feel free to shop around. Compare potential rates and terms, then whittle down that list to decide which lenders are worth applying to.

A professional loan adviser may have some helpful advice for you as you look for the best deal and learn about everything that you’ll need to contend with along the way. Thanks to technology, you can keep moving forward to better financing while staying safe and find the best mortgages for self-employed borrowers. 

Contact the Professionals at A and N Mortgage

Mortgage refinancing as a self-employed individual is difficult because it requires lots of supporting paperwork for the lender to verify how much you earn and provide them with comfort to ensure that your business will continue to make that much as you prepare to undertake monthly payments for this new loan. These tips will help to prepare and position you to satisfactorily address many of your potential lender’s concerns. While there are plenty of variables depending on the lender and the nature of your self-employment, this overview will give you a head start on what is needed to navigate this process. Feel free to reach out to the team at A and N Mortgage for your mortgage needs.


A and N Mortgage Services Inc, a mortgage banker in Chicago, IL provides you with high-quality home loan programs, including FHA home loans, tailored to fit your unique situation with some of the most competitive rates in the nation. Whether you are a first-time homebuyer, relocating to a new job, or buying an investment property, our expert team will help you use your new mortgage as a smart financial tool.

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Mortgage Pre-approval Tips

As you approach the home buying process, you may be inclined to start by looking at houses in your desired location or getting in touch with a realtor. To make the process of buying a new home more convenient, however, you should actually start by obtaining mortgage pre-approval. Starting from here will save you time and energy in addition to helping you narrow down what you can afford from the start. 

What is a Mortgage Pre-Approval?

By consulting with a mortgage banker, you can often determine your mortgage pre-Mortgage Pre-approval Tipsapproval in as little as an hour, if you have all of the required documentation handy. It is an application for credit that gives you a pre-approval mortgage in principle. You’ll get a loan amount that you are likely eligible for and terms that you can expect to receive when you apply.

You’ll be given a quick approval or denial with any conditions before moving forward in your home search. Though a pre-approval is not guaranteed (your financial situation may change, interest rates may go up or down, etc.), it is a pretty reliable estimate of how much you can expect to get for a mortgage and what your terms might look like.

What are the benefits of pre-approval?

  • Know where you stand. Pre-approval lets you know, without expending a lot of effort, where you stand with a potential lender. Your pre-approval will tell you how much the lender is willing to let you borrow, which will influence the properties you can buy. You can sift through properties confidently, knowing what your realistic price range will be.
  • Sail through the formal application and purchasing process. Once you’ve found a home, the formal loan approval process should be smoother and allow you to close in less time since you have all of the important information close at hand.
  • Pre-approval is also great to have when making an offer. Showing that your finances are in order or that you’ve at least begun the financing process is attractive to a seller in a bidding war. It may help you edge out the competition. It may also put you in a better position to negotiate with the seller if they are motivated to close quickly since you’re already on the path to securing your mortgage.
  • Accurately anticipate costs. Going through the pre-approval process will save you a lot of guesswork. You’ll know what to expect your monthly payment will be, anticipate how much you need to cover for a down payment and estimate closing costs.
  • Lock in at a great rate. All of this information helps you prepare for the actual mortgage application and closing process, potentially saving you a lot of time and frustration. Better still, pre-approval mortgages provide rates that are good for three to four months. If interest rates are expected to increase, consider securing a better rate with a pre-approval.

How Do You Apply Online for Mortgage Pre-approval?

Potential lenders can provide access to a secure online portal or use email and telephone to collect the required documentation to determine what you are approved for. You’ll need to provide proof of income, like W-2s and bank statements. You’ll also authorize your lender to pull a credit report, which may impact your credit report. 

Your credit report will show that your credit was pulled and whether you were approved, denied, or chose not to go through with financing for the next five years. Be prepared to explain multiple inquiries if asked. Know that your credit score might take a hit if you seek pre-approval from several different lenders, especially if you are denied. In addition to your credit report, make sure you can check off the other items on this basic pre-approval checklist.

If you have these handy, you’ll breeze through the pre-approval process: 

  • Identification: items that prove you are who you claim to be.
  • Bank account and investment statements: to show that you have enough income to make your monthly payments.
  • Proof of assets: verify whether you own a car or boat.
  • Proof of income: A letter from your employer or recent pay stubs to show regular income. Self-employed individuals may be subject to additional verification.
  • Debt information: recent statements from your student loans, car loans, credit cards, and other outstanding liabilities. Disclose everything because lenders will verify this information, and it looks bad if you try to hide anything.

Dos and Don’ts of the Pre-approval process:

Pre-approval Dos: 

  1. Consult with a mortgage banker. A mortgage banker is often a great first stop on your journey to mortgage pre-approval. They can guide you through the process of obtaining a pre-approval and help you find the best solution for your situation. A banker can help you work through a mortgage pre-approval checklist by obtaining a credit report without negatively impacting your credit score to prepare you and your application to your lender.

    Since a mortgage banker acts on your behalf and with your best interests in mind, they can help you find the best mortgage product and ensure that you meet a lender’s policy requirements so that there are no surprises when you close. They’ll also be able to give you accurate calculations to assess how much you can borrow and repay based on your position. When it comes time to process your mortgage, they can help ensure proper processing and present your pre-approval package to the lender that you choose. All of this focuses your efforts and saves you time.
  2. Get pre-approved as your first step on the path to homeownership. Consult with a mortgage banker, and you can have your pre-approval in hand that same day if you have everything you need. Knowing how much you have to spend informs your choices and helps you shop more effectively.
  3. Get your documents in order. Your mortgage banker will tell you what documents your lender requires as part of the pre-approval checklist.
  4. Read the fine print. Your loan officer will send you a pre-approval document. It’ll show the interest rate you’ll get, the terms of the loan, and that you’re pre-approved for. Make sure that you understand these terms, so ask all of the questions that you need to. Small changes, like fractions of percentage points, can have significant implications on your future monthly payments, so take your time.

Pre-Approval Don’ts

  1. Don’t get pre-approved for more than you can afford. You may be pre-approved for a larger amount than you need, but make sure that you can comfortably cover the monthly payments. Getting in over your head at this early stage isn’t smart.
  2. Don’t do anything that will significantly impact your credit after you’ve been pre-approved. A pre-approval isn’t guaranteed, especially if you do anything that shows you as an increased credit risk. Hold off on major purchases, like a new car until you’ve finalized your mortgage. Doing something like that can increase your debt-to-income ratio, and hurt your approval chances or increase your rate. Don’t apply for any new credit, either. Taking out a personal loan or new credit card, or co-signing a loan can have the same impact on your credit profile and jeopardize your pre-approval.
  3. Don’t quit or change your job after your pre-approval. Lenders need to see reliable income to ensure that you can service your monthly payments, so stay put until your mortgage is closed. If you lose your job, wait until you can prove steady income to apply, or you’ll risk rejection. Similarly, becoming self-employed as you’re going through this process complicates it significantly. It is best to hold off on making these significant changes since it’s such a vital part of any successful mortgage application.

Contact A and N Mortgage For Professional Advice

Start your home search by going through the pre-approval mortgage process before you start looking at houses. There are plenty of benefits to choosing to go through this simple, straightforward process. Find a mortgage banker or lender to help you organize your pre-approval package. They’ll review your documents, check your credit score and let you know how much you can expect to be approved and what terms you can look forward to.

This information will help you choose homes that you can comfortably afford, knowing that you are already well on your way to financing the home of your dreams. It will speed up the formal application process, help you get your down payment and closing costs ready, and assist you when you go to make an offer. Having a pre-approval makes sellers take you more seriously and is well worth the time to make your efforts more efficient.

Pay attention to these tips to ensure that your pre-approval is the best deal you can get and successfully complete the mortgage loan process. Following these suggestions will help you get pre-approved quickly to find and finance your new home with ease. Contact A and N Mortgage today to speak with a knowledgeable mortgage consultant!


A and N Mortgage Services Inc, a mortgage banker in Chicago, IL provides you with high-quality home loan programs, including FHA home loans, tailored to fit your unique situation with some of the most competitive rates in the nation. Whether you are a first-time homebuyer, relocating to a new job, or buying an investment property, our expert team will help you use your new mortgage as a smart financial tool.

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The Home Buying Process Explained

The home buying process is a considerably stressful one, especially if you are a first-time homebuyer. Whether you are a first-time homebuyer or you have been through the process before and are in need of a refresher, have a look at this comprehensive guide to the home buying process and make sure you make an informed decision.

How To Start The Homebuying Process

Buying a house requires a lot of time and effort, but the process begins with a few simple The Home Buying Process Explainedsteps. First, you should consider reaching out to a mortgage consultant who can determine what options are available to you and help you select the best loan for your unique set of circumstances.

Next, it’s time to determine how much you can afford to pay for your new home. As a rule of thumb, lenders generally recommend that you look for homes that cost approximately three to five times greater than your annual household income.

This may vary from one person to another, but it’s generally true for buyers who have at least a 20% down payment and only a moderate amount of other debt.

Getting Pre Approved For A Mortgage

After having a look at your options for properties in the area you are interested in, it’s time to get pre-approved for a mortgage. You will need to know how much you can actually spend before deciding which property you would like to call home.

To get preapproved for a mortgage, you need to provide some financial information to your mortgage providers, such as your annual income and the amount of savings and investments you might have.

After reviewing this information, your mortgage banker will be able to tell you how much you can borrow. When you have this information, you can start looking for homes in the price range you were pre-approved for.

Processing Paperwork In The Homebuying Process

In order to be preapproved for a mortgage, you will need to provide your mortgage banker with some paperwork. This is necessary because they need to assess your financial situation, particularly your income, assets, and debts to be able to determine what loan would suit your needs.

There are no hard and fast rules when it comes to the type of paperwork you will need to provide to buy a home, but generally, you will have to show bank statements, pay stubs, or

  • Pay Stubs (from the last 30 days)
  • W2 or 1099 (from the last 2 years)
  • Tax Returns (from the last 2 years)
  • Bank Statements (from the last 2 months)
  • Any statements (from the last 60 days) of other assets such as stocks or a 401K

It’s also important to provide proof of how you gathered your down payment, especially if this wasn’t done by putting money aside from one month to another. Before receiving pre-approval, your lender might also check your credit reports and scores. Lastly, you will be asked to provide your employer’s human resource office phone number to verify your employment status and a copy of your valid State ID or Driver’s License.

What If Someone Gifts Me Funds To Buy My Home?

More and more first-time buyers are relying on gifted deposits to use as a down payment for their new home. Whether it’s money your grandparents saved in a shoebox or a generous gift from your parents or loved ones, monetary gifts can go a long way towards helping you purchase a home.

Nevertheless, the source of all the funds being used as a down payment will need to be verified by your mortgage lender. Many lenders require a gift funds letter from the donor that proves the money is a gift that will not have to be repaid.

To avoid any issues, you have to confirm the relationship between you and the donor and get a letter that confirms that the money is indeed a gift and not expected to be repaid. Here’s what the letter should include:

  1. The donor’s name, address and phone number
  2. Explanation of the relationship to the borrower.
  3. The dollar amount that was gifted.
  4. The date the funds were transferred.
  5. A clear and precise statement from the donor that no repayment is expected.
  6. Donor signature.
  7. The address of the property being purchased.

The gift funds letter needs to be signed by both parties. In some cases, the lender might require further evidence of this gift, such as the bank statements of both the receiver and the donor which show the transaction.

If the monetary gift has to be repaid it is considered a loan. Your mortgage lender may have to incorporate the repayments to your monthly outgoings, which can have a severe impact on your affordability. This is why it is so crucial that you communicate with your mortgage lender throughout the loan process.

Why Do I Need To Pay Earnest Money?

Earnest money is a deposit that you make as a buyer so the seller knows you’re committed to purchasing the property. It’s a representation of your good faith, and it gives you some extra time to complete all the inspections, property appraisal, conduct the title search, and get financing before closing on the house.

In most cases, earnest money can be considered an escrow deposit. It is generally delivered when you sign the purchase agreement or sales contract, but other times it can be attached to the offer.

The funds are typically kept in an escrow account until you close on the house, and then applied to your down payment and closing costs. The value of the earnest money deposit can be anywhere from 1 to 10% of the sales price, depending on the agreement between seller and buyer and market interest.

As a buyer, you may be able to recover the earnest money deposit if something goes wrong before closing on the house. This may be anything from inspections revealing a serious defect to the house not appraising for the sale price.

Nevertheless, you should keep in mind that earnest money is not refundable just because you decide to change your mind as a buyer. You may also lose the deposit if you fail to meet the timeline outlined in the contract or if you decide not to go through with the purchase for contingencies that are not listed in the contract.

Remember that the earnest money is always refunded to the buyer if the seller decides not to go through with the sale.

Do I Need Homeowner’s Insurance and Who Should I Use?

After signing a purchase contract for your new house, you need to start thinking about getting homeowner’s insurance.

A good place to start is your loan officer, who may refer you to companies they trust and recommend. Reach out to several insurance companies to get some quotes and choose the one that suits you best.

In most cases, you’ll need to purchase homeowner’s insurance before closing. Failing to do so may mean that the loan can’t be finalized. Procuring mortgage insurance is for your own good, as it protects the property financially against fires, natural disasters and other events such as theft.

Having homeowner’s insurance also protects the interests of the mortgage provider, and it’s the reason they require proof of coverage before closing on a house.

Avoid Big Financial Transactions

While going through the home buying process, it’s important to avoid making financial mistakes that may cost you in the long run. When it comes to the process of closing on your home, transparency is key, so you should avoid making any big financial transactions that might raise suspicions. Here are some of the common mistakes that you should avoid.

1. Do not make any large deposits.

Large deposits could indicate that you have recently borrowed money. This kind of information could spur a reevaluation of your DTI ratio. The rule of thumb for making deposits is that no deposits, apart from direct deposits from payroll, should exceed 25% of your gross total monthly income. You should also avoid moving money between accounts or making frequent smaller deposits.

2.Pay your credit card and loan payments on time.

Since your ability to make timely payments is one of the most important factors that determine your credit score, it’s extremely important to maintain a clean record of payment history.

3.Avoid large purchases.

Large unplanned purchases could drastically change your savings plan. Don’t accumulate more debt by applying for more loans. Negative effects to your credit rating could mean negative consequences for your mortgage application.

4. Do not open a new bank account.

Once you’ve started the mortgage application process, it’s highly recommended that you do not open a new bank account.

Be open and transparent with your mortgage banker about your finances and they can help you avoid these common pitfalls.

Getting a Credit for Repairs Before Closing

During the homebuying process, you may notice items around the property that require repair. If you want to take care of this before closing, you have two options.

First, you can ask the seller to repair them, but there is no guarantee that they will agree to do it. Your realtor can give you advice when deciding what repairs to ask for from the seller.

Your second option is to apply for credit for repairs before closing. But you need to be careful when applying for this because it cannot be called a “repairs credit”, as this name may indicate to the bank that the property is uninhabitable.

Try to get help from your attorney or realtor to make sure you are able to obtain a credit called a “closing cost credit” that you can use for repairs after closing.

Why Do I Need to Provide My Federal Tax Transcripts?

Your loan officer may ask you for your federal tax transcripts for the current year and the previous two years as well.

The mortgage company that provides you with the loan for buying a property needs to confirm that you have filed your tax returns with the IRS. This is a necessary step to prevent fraudulent loan applications from going through the mortgage process.

To obtain the transcripts, you can go to the IRS website and follow the instructions provided. Alternatively, you can call and talk to a representative to obtain the transcripts. You can ask for the transcripts to be faxed directly to your loan officer. This should generally not take more than half an hour.

This process is essential if you’re self-employed because it’s the best way for the bank to verify your income.

Should I Pay Points when Buying a Home?

Mortgage points are a common way for prospective homeowners to lower their interest rate when buying a home. Paying for points on a mortgage means that you are actually paying interest for the loan right now.

You may wonder what’s the benefit of doing this. In return for paying for points, you can lock in a discounted rate, which depends on the number of points you decide to purchase. The more points you buy, the more likely it is that your mortgage rate will drop.

As a rule of thumb, one point translates into a 0.25 percent deducted from the mortgage rate. The cost of a point is 1 percent of the total mortgage amount. For example, if you obtain a $300,000 mortgage, one point would cost $3,000. Depending on your financial situation, you may purchase more than one point to reduce the interest rate as much as possible.

Most lenders allow you to purchase points, but it’s not mandatory to go down this route. Borrowers can also consider refinancing. Some lenders allow you to negotiate mortgage points, but you should always talk to your loan officer in order to be able to determine whether buying points is a good option for your particular financial situation.

How Can a Loan Officer Help with the Loan Application Process?

The process of applying for a mortgage can be indeed an overwhelming one, especially if you are a first-time buyer. By working with the right loan officer, you can get help with everything from the pre-approval process to the mortgage application, loan processing, underwriting and closing.

The loan officer will help you prepare your application, and they will generally have to deal with a lot of paperwork because of the various mortgage regulations at the local, state, and federal levels.

When choosing a loan officer, you should make sure they have an excellent reputation and that they are always maintaining industry standards. They should be able to bring expertise to the loan process.

At A and N Mortgage, you can choose from loan officers who specialize in different loan programs. You can get pre-approved fast and explore multiple loan options and interest rates. You can get the help you need whether you are a first-time homebuyer, you’re relocating to a new job, or buying an investment property.

A and N Mortgage can help you every step of the way thanks to the team of experienced mortgage professionals who will do their best to help you find the ideal loan product for your situation and secure funding with the best terms.

Contact A and N Mortgage today with all your mortgage-related questions!


A and N Mortgage Services Inc, a mortgage banker in Chicago, IL provides you with high-quality home loan programs, including FHA home loans, tailored to fit your unique situation with some of the most competitive rates in the nation. Whether you are a first-time homebuyer, relocating to a new job, or buying an investment property, our expert team will help you use your new mortgage as a smart financial tool.

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Everything You Need to Know About Mortgage Insurance

What it is, Why it’s Important, and How to Lower It

Most homebuyers try to avoid PMI because it must be paid in addition to your monthly mortgage payment. But there are plenty of situations where taking on mortgage insurance payments might put you ahead of the game.

Private Mortgage Insurance, also called PMI, is an extra cost incurred when you take out Mortgage Insurancemortgages and put down less than 20% of the sale price. Homeowners are required to keep PMI coverage in place for varying terms depending on the type of loan. Usually, they need to achieve at least 22% equity in their home before they’re allowed to drop PMI. The PMI premium varies by the type of mortgage loan that buyers select as well as their creditworthiness.

By purchasing a house using a smaller down payment, you save money and build equity more quickly. PMI gives you a chance to move on from renting and start the path to homeownership sooner than you may think, and it often quickly pays for itself several times over.

Especially as home values continue to rise, and interest rates are at historically low rates, rapidly getting into your new home as soon as possible may make sense. Considering the cost of PMI coverage may be what it takes to make that a reality.

What is Mortgage Insurance?

Private Mortgage Insurance (PMI) is insurance required by the lender when you finance the purchase of a property with a down payment of less than 20% of the sales price. Buyers pay the PMI premium as part of the mortgage agreement to protect lenders from default. Some loans require PMI coverage upfront while others require it for certain portions of the life of the loan, and some require a mixture of both.

In a typical market, lenders expect that if buyers default on a mortgage, they’ll lose about 20% of the money they’ve loaned through the foreclosure process. PMI shields lenders from potential losses. If you bring less than 20% of the loan to value to the table PMI will make lenders feel more comfortable taking the risk.

How does Mortgage Insurance Work?

Mortgage insurance works differently for different types of loans. Conventional, FHA, USDA, and VA loans all have unique ways of addressing PMI coverage. Your lender will usually arbitrarily select a mortgage insurance provider approved for your type of loan unless you specify otherwise.

Conventional Loans

For conventional loans, lenders usually require that you maintain PMI coverage until you’ve reached 20% equity in your home. You can avoid paying for PMI by putting the full 20% down. Alternatively, it’s usually included in your monthly mortgage payment.

After you have 20% equity in your home, you can ask to cancel PMI. At 22% equity, lenders are required to remove it. PMI coverage usually costs between 0.19-1.86% of the loan amount and is often included in your monthly mortgage payment.

FHA Loans

The Federal Housing Administration (FHA) is tasked with facilitating the path to homeownership, so it often accepts as little as 3.5% down and offers loans with less stringent qualification requirements. To secure an FHA loan, you must cover an upfront mortgage insurance premium of 1.75% of the loan amount and pay an annual premium of 0.45-1.05% of the average outstanding balance of the loan each year. You pay the annual premium (MIP) in monthly instalments for the loan duration if you put down less than 10%. If you put down more than 10% of the property value, you’ll only need to pay the MIP for 11 years.

USDA Loans

USDA loans offer financing that doesn’t require a down payment for rural and suburban homebuyers. To ensure these mortgage loans, you’ll pay an upfront guarantee (in 2019 that was 1% of the loan amount) and an annual fee of 0.35% of the average outstanding loan balance. The fees change from year to year but are fixed for the duration of the loan.

VA Loans

Veterans must pay an upfront funding fee of 1.25% to 3.3% of the loan amount instead of PMI. The rate depends on your down payment and whether you’re using the program for the first time. This fee helps fund the program and allows the Department of Veterans Affairs to guarantee the lender that you won’t default on a significant portion of your loan.

When Do You Need Mortgage Insurance?

There are a few situations where opting to pay for PMI makes financial sense. While no one likes to pay more each month, taking advantage of PMI can enable you to buy a home with less money down. If you have less than ideal credit history, taking on PMI secures the lender to take out a mortgage, enabling you to derive these benefits of homeownership.

Opting to buy a house using a lower down payment saves you time. You don’t have to rent while you save for a down payment. Additionally, instead of paying rent to your landlord (a payment that often rises each year), you begin building equity towards owning your home outright.

Mortgage Insurance Rates

Suppose you were to provide PMI coverage for each loan type—conventional, FHA, USDA, and VA—for a $300,000 home with a 3.5% down payment on a 30-year mortgage with a 3.75% fixed rate. Here’s what you would expect to pay each month, accounting for the fact that annual mortgage costs decrease as the loan value shrinks as payments are made. Keep in mind that mortgage insurance is calculated as a percentage of the loan amount.

Conventional Loans

Pay nothing upfront and split an annual cost of about $3,500 into $280 each month. Cancel your premium after you’ve paid up 20% in equity. The actual rate for PMI on conventional loans varies based on factors like creditworthiness. Higher credit score candidates, for example, pose less risk of default for lenders and receive lower rates.

FHA Loans

Initial mortgage insurance would set you back $5,000. Each year, you would pay $2,500 for mortgage insurance, a little more than $200 per month.

USDA loans

A $2,900 initial mortgage insurance payment would be required upfront. Each year, pay a $1,00 annual mortgage insurance premium—about $84 per month.

VA Loans

To secure a VA loan, you’ll have to pay a one-time funding fee to cover initial mortgage insurance costs. In this case, that would be a single payment of about $6,700.

Reducing Your Mortgage Insurance Payment

There are a few things that you can do to reduce your mortgage insurance payment. You want to do whatever you can to reduce the lender’s risk to lower your PMI. Here are some ways that you can do that:

1. Have a high credit score.

Mortgage insurance, when you have a 740 or 760 credit score and have a loan to value ratio below 85%, results in a meager premium because you represent a lower risk to the lender. If refinancing, don’t take cash out to ensure that you get the lowest rates.

2. Choose your loan type wisely.

FHA and other government loans often require that you pay more for mortgage insurance than conventional loans since the government is shouldering more risk.

3. Provide proof of lower risk.

Conduct an appraisal to get a lower loan-to-value or increase your down payment to lower your PMI.

Deciding If Mortgage Insurance is Right for You

Based on current rates of inflation and increasing housing prices for the average homeowner, paying for PMI can yield a 530% return on investment by the end of year five. The home appreciates while you own it, outpacing inflation, and relying on PMI coverage to move-in with less money used for a down payment.

In that way, opting to take on a PMI can ultimately position you for a more secure future. It can be a tool for allowing you to begin to build wealth by facilitating your real estate investment so that you quit paying rent and start accruing equity. Though the cost of PMI varies significantly based on your circumstances like loan type and creditworthiness, it can often make sound financial sense.

In best-case scenarios, adding a PMI that costs a couple of hundred dollars each month will quickly provide a return. The simple fact that it allows you to build equity may be enough to merit considering whether to take on PMI.

Mortgage insurance coverage looks different for each type of loan and each buyer, so investigate what PMI costs and what the potential returns may look like in your particular situation. If it makes sense to move forward with a mortgage and less money down, PMI will allow you to do just that. For additional information on financing your new home, contact the mortgage experts at A and N mortgage for your mortgage insurance needs.


A and N Mortgage Services Inc, a mortgage banker in Chicago, IL provides you with high-quality home loan programs, including FHA home loans, tailored to fit your unique situation with some of the most competitive rates in the nation. Whether you are a first-time homebuyer, relocating to a new job, or buying an investment property, our expert team will help you use your new mortgage as a smart financial tool.

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How Do FHA Loans Work?

The Federal Housing Authority (FHA) was created by Congress in 1934 to help stem a rising tide of foreclosures and make homeownership more affordable. 

While the FHA does not originate loans, it is one of the largest mortgage insurers in the world; insuring almost 47 million mortgages since its inception.

What are FHA Loans? 

FHA loans are mortgages issued by private lenders and insured by the Federal Housing Administration. Lenders can be banks, credit unions, or non-bank entities, but they must be approved by the FHA to issue FHA-insured loans. By working with approved lenders the FHA helps by lowering the risk for the residential loan issuer, which gives more buyers access to loans they need. Because the FHA insurance protects lenders from borrower default, FHA lenders are more willing to offer favorable terms to borrowers who do not meet stricter Fannie Mae or Freddie Mac criteria.

FHA loans are known for their flexibility. This famed flexibility also applies when homeowners encounter circumstances that impair their ability to pay their mortgage, such as loss of employment or reduction in income. The FHA can provide options to distressed homeowners to help them prevent foreclosure. Although the insurance cost associated with FHA loans passes down to the homeowner, the borrower can phase out the insurance as the loan is paid off. The equity built up over time secures the loan. Working with a mortgage broker for this type of loan offers the borrower protection because the lender has to follow the FHA’s servicing guidelines. 

FHA Loan Requirements

Although FHA loans have looser qualifications than conventional loans, they still have minimum requirements. Moreover, certain lenders may add additional stipulations. To ensure that you get the best FHA mortgage rate and loan terms, borrowers should shop more than one FHA-approved lender and compare offers. 

Additional Read: Your Guide To FHA Loan Requirements

Here are the minimum requirements for FHA loans:

Credit Score:

Prospective homeowners with credit scores of 580 and above qualify for the lowest down payments. Borrowers with credit scores of 500-579 can still qualify for FHA loans, but they will need to come up with a larger down payment. 

If your credit score has dipped below 500, it’s beneficial to raise your score before considering buying a home. However, you may also consider that a family member may apply to be a non-applicant co-borrower or co-signer, which will help reduce the loan risk. Any family member with a responsible credit history can serve as the co-borrower or co-signer.

Down Payment:

If you have a credit score of 580 and the minimum down payment requirement for an FHA loan is only 3.5%. A credit score of 500-579 would require a down payment of 10% of the home’s purchase price.

Debt-to-Income Ratio (DTI):

The FHA loan requires a specific debt-to-income ratio (DTI). The front-end DTI ratio is 46.99% and the back-end DTI ratio is 56.99%.  In other words, monthly debt payments cannot exceed the set DTI ratios of a borrower’s gross income. DTI includes debts that are in deferment. For instance, for student loans in deferment, FHA loan underwriters will include 1% of the loan’s total as the monthly payment amount.

Applicants who rent will typically include rental payments in DTI calculations. However, if projected monthly housing expenses will be lower with a mortgage than with rent, the lender will use the lower mortgage payment for calculations.

Documented Steady Employment/Income:

FHA home loan borrowers must have a steady employment history or have worked for the same employer for the past two years. 

No History of Foreclosure:

The FHA requires that all borrowers be free from foreclosure for at least the last three years. 

In addition to borrower qualifications, all properties insured by the FHA must also meet the agency’s minimum standards. Here are general guidelines for property requirements:

  • The loan must be for a principal residence. Within 60 days of closing, at least one borrower must occupy the property.
  • The property cannot be purchased for investment.
  • The property must undergo an FHA appraisal. An FHA appraisal includes an inspection—which is separate from a home inspection—that assesses a home on whether it is worth the purchase price and meets minimum safety and habitability standards.
  • The property cannot be a flip. In other words, the borrower cannot buy a property using an FHA-backed mortgage within 90 days of a prior sale.
  • Borrowers must take title to the property in their names or the name of a living trust at settlement.

Do FHA Loans Have Income Requirements?

There are no minimum or maximum income limits associated with FHA loans. However, borrowers must have:

  • Two or more established credit accounts, such as a credit card and a car loan.
  • No delinquent federal debt or judgments (tax-related or otherwise) or debt from previous FHA-insured mortgages.
  • Signed, dated documentation for cash gifts that help with the down payment.

Although the FHA insures the loan, individual lenders make the final decision as to whether or not to finance a property. It is also the lenders’ prerogative to determine their specific qualifications, such as a higher credit score or a better debt-to-income ratio. It’s advisable to speak directly with your lender to review their preferred requirements. 

What are FHA Closing Costs?

All mortgages have closing costs, and FHA loans are not excluded. However, you may find that your FHA closing costs are less than those enforced by most commercial lenders.

Typically, FHA loan closing costs amount to approximately 2%-5% of the purchase price of the property. These fees cover the cost of home appraisals, origination fees, titles and other mandatory costs. While 2%-5% may sound like a relatively small amount, this depends on the value of the property you’re buying, so it’s important to factor them in when planning your budget. 

Keep in mind that closing costs vary from one FHA-approved lender to another, so be sure to shop around and compare lenders before making your decision.

Applying For An FHA Loan

Applying for FHA loans requires several personal and financial documents, including:

  1. A valid Social Security number.
  2. Proof of US citizenship, legal permanent residency, or authorization to work in the US.
  3. Bank statements for the past 30 days, and usually longer.
  4. Documentation for any deposits made into your bank accounts, such as pay stubs.
  5. Credit reports.
  6. Tax returns.
  7. Employment records. 

The lender may be able to automatically retrieve some required documentation, like credit reports, tax returns, and employment records.

Exceptional circumstances, such as student status or insufficient credit history, may require extra documentation. 

FHA Loan Limits

The FHA will only insure properties up to a published maximum price. The loan limits are updated annually and are influenced by conventional loan limits set by Freddie Mac and Fannie Mae. The type of home—such as a single-family or duplex—also impacts these limits.

In 2020, FHA loan limits range from $369,000 to $707,700. 

Here are the FHA loan limits in Cook County:

  • 1-unit: $368,000
  • 2-unit: $471,100
  • 3-unit: $569,450
  • 4-unit: $707, 700

Counties with mid-range housing prices also have mid-range FHA loan limits. HUD’s website lists the FHA loan limits for every county in the nation.

Who are FHA Loans Best Suited For?

True to its original mission, the FHA helps lower-income borrowers and those that may not qualify for a conventional loan (Fannie Mae criteria) from a mortgage company. Allowing a minimum down payment of 3.5% with a 580 FICO score, FHA loans assist buyers with lower credit scores and savings.

Contrary to popular belief, FHA loans are not limited to first-time homebuyers. Many people refinance with FHA-insured loans or are repeat FHA buyers. However, FHA loans are indeed the most popular option for first-time homebuyers.

For borrowers with good credit and a medium down payment of 10-15%, FHA loans are often more expensive than conventional loans. On the other hand, FHA loans are usually the least costly option for those with lower credit scores and down payments. However, there are no hard-and-fast rules, as much depends on the current market. 

FHA loans can be easier for individuals with lower credit scores and down payments to qualify for than conventional loans. They also give the borrower refinancing options and offer more protection from foreclosure.

What About Borrowers Who Do Not Meet FHA Requirements? 

FHA’s standard underwriting criteria considers many income and debt-related factors. If a borrower’s situation deviates somewhat from the established criteria, manual underwriting can be used. Lenders will carefully review the applications from such non-standard borrowers before determining whether to approve or deny a loan.

FHA Loans at A and N Mortgage

As an FHA-approved lender, A and N Mortgage is proud to offer FHA loans to first-time buyers, with a low income and poor credit history. We’re committed to helping you buy a property, regardless of your situation. 

Provided you meet the standard criteria and can show that you’re eligible for an FHA loan, A and N Mortgage can help you to take your first steps up the home buying  ladder. With a dedicated team of Mortgage Consultants and Loan Officers, we can help you  find the right home loan and even secure your pre-approval so you can start house hunting straight away. 

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How Do VA Loans Work

VA loans, or Veteran Loans, are a benefit offered to Veterans of the U.S. Armed Forces on behalf of a grateful nation to facilitate the process of homeownership. The VA loan program was established in 1944, providing opportunities to millions of service members. VA loans offer an attractive $0-down payment and favorable terms that aren’t available to the general public.

VA loans are offered through private lenders, much like a traditional mortgage, but are guaranteed by the U.S. Department of Veterans Affairs. Since the VA backs VA loans, these loans typically offer more flexibility than is available to the average homeowner, such as looser credit requirements and no firm loan limits.

How Do VA Loans Work?

VA loans are provided by private lenders like banks and mortgage companies for veterans looking to build or buy a home that will serve as their primary residence. These loans differ from traditional loans in that the Department of Veterans Affairs guarantees a portion of the loan amount if the borrower defaults. This security allows lenders to be generous with their terms and makes them willing to work with veterans when possible.

Who Qualifies For A VA Loan?

First, you’ll need to verify that you or your spouse qualifies for the VA loan program. Verification is accomplished by obtaining a VA loan Certificate of Eligibility (a COE). A COE is granted to:

  • Active duty military members who have served 90 continuous days.
  • Veterans who meet ‘length-of-service’ requirements (at least 90 consecutive days or during peacetime for 181 consecutive days). 
  • National Guard or Selective Reserve members who have completed 90 days of active duty or six credit years of service. 
  • The surviving spouse of active duty service members who died in the line of duty or from a service-related disability and have yet to remarry (or surviving spouse who remarried after the age of 57 or Dec. 16, 2003). 
  • The spouse of service members who are prisoners of war or missing in action are also eligible.

It’s possible that you may still be eligible for a VA loan if you don’t meet the ‘length-of-service’ requirements under certain circumstances, such as an honorable discharge for a service-related disability. 

Dishonorable discharge or ‘other than honorable’ discharge may prevent you from qualifying for eligibility. In some cases, you may apply with the VA to upgrade your discharge status. 

How Are VA Loan Entitlements Determined?

Your VA entitlement is basically how much the VA is willing to guarantee to the lender on your behalf if you default on your VA loan. The concept of the VA entitlement can be a rather confusing one, but it generally consists of two types: basic and secondary entitlement. 

Basic Entitlement: Your basic entitlement is usually 25% of your total mortgage or $36,000. This is the VA’s maximum guarantee for loans up to $144,000. 

Secondary Entitlement: The secondary entitlement, sometimes referred to as a bonus entitlement, is up to 25% of the current FHFA (Federal Housing Finance Agency) conforming loan limit (which varies by county and depends on where the house to be purchased is located), less the amount of the basic entitlement.

If the house you are looking to purchase costs more than four times your basic entitlement (above $144,000), you can tap into your secondary or bonus entitlement. The secondary entitlement is 25% of the FHFA conforming limit. For 2020, that is $510,400 in most areas, resulting in a secondary entitlement of $127,600 less than the basic entitlement, which equals $91,600 as a secondary entitlement.

If you’re looking at a house that costs less than $144,000, the basic entitlement guarantee may help. Lenders are often willing to provide loans that are up to four times the value of the entitlement. Knowing your entitlement determines the amount of the loan that you can choose to obtain.

How Do You Apply for a VA Loan?

Applying for VA loans can look much different from the standard mortgage process.

First, gather the necessary information you’ll need to apply for your COE in order to verify your eligibility. Once your eligibility has been confirmed, you will be given an ‘entitlement,’ which is the amount of your loan that the VA will back. 


Next, you’ll need to qualify for the loan by applying through a VA lender. It’s helpful to contact a VA home loan lender to begin the preapproval process. A preapproval letter from a qualified and trusted VA lender will benefit you when it’s time to place an offer on a home. As with other mortgages, you’ll need to prove that you can make the mortgage payments by showing sufficient income and carrying a minimal debt load. While there is no minimum credit score for a VA loan, private lenders may have their own minimum credit score requirements. 

Then your lender will request a VA appraisal of the house that you plan to buy. The appraisal isn’t a home inspection, but it will make sure that your new home is worth what you plan to pay and that it meets the VA’s minimum property requirements. The appraisal process ensures that undertaking the loan is a sound investment for you and the lender, offering you both an extra layer of security.

Last, you need to sign all of the necessary paperwork at closing to make everything official.

What Are The Advantages of VA loans? 

No Down Payment

A $0-down payment is a welcome departure from the typical down payment, which can typically vary up to 20% of your new home’s cost, thereby reducing upfront costs. However, you’ll be responsible for paying a VA funding fee that goes to support the program. When you pay no down payment, the VA funding fee for the first time that you use the program amounts to 2.30% of the amount financed. This fee drops to 1.65% of the amount financed if you put down 5-10%, and down to 1.40% if you put more than 10% down on your purchase.

VA Loans Are Reusable

If you pay off one loan, you can obtain another full VA entitlement again and again, as long as you continue to pay it off. You may also qualify for another VA loan if you have an existing VA loan or lost one of them to foreclosure in some cases. 

VA Loans Don’t Require PMI

Since the VA guarantees that a substantial part of your loan will be covered in the event of default, you aren’t required to carry PMI (private mortgage insurance). Eliminating the need for PMI can save your household hundreds, even thousands, of dollars, depending on your property’s value.

Faster Acceptance Process

Due to the reduced risk to lenders since the VA is backing all or part of the loan, VA loans tend to move faster from start to finish. It can often be a quicker and easier process to secure a VA loan than to obtain a standard home loan.

Competitive Rates

Individuals who qualify for VA loans are deemed safe borrowers by banks and credit agencies, casting a more favourable light on these applicants. Consequently, as a VA loan borrower, you receive preferential treatment in the form of more lenient requirements and highly competitive rates. If you have poorer than average credit, you may still qualify for a VA loan, since the VA guarantees what you borrow. Veterans with a history of foreclosure or bankruptcy can apply if enough time has passed.

VA Loan Financing Flexibility

You can lower your interest rate by refinancing your VA loan. There are also other types of VA loans, including cash-out financing or home construction. You can also use VA financing with the Native American Direct Loan program if eligible.

No Loan Limits

As of January 1, 2020, there are no loan limits on VA loans for veterans and service members with full entitlement to VA loans.

VA loans are designed as a way to thank active-duty military personnel and veterans. If you qualify for the VA lending program, you may be able to enjoy an almost pleasant mortgage application process thanks to the U.S. Department of Veterans Affairs’ backing. 

Even though private mortgage lenders offer the loans provided through the program, they usually go the extra mile to lend to veterans because the VA will back a portion of the loan in the case of default. The part of the loan that the VA will guarantee is called your entitlement, which is at least partly determined by the FHFA loan limits for the location of your future home.

The fact that you begin the loan application process with this entitlement goes a long way in securing the lender’s position, predisposing veterans to streamlined processes, fast answers, competitive rates, and the chance to purchase a primary residence without a down payment. While applicants are still subject to traditional financial review, lenders are willing to work with veterans applying through the program. Many find that VA loans have a welcome degree of flexibility compared to their conventional counterparts.

A and N Mortgage is Here to Help

You can apply for a VA loan with us here at A and N Mortgage, as we are one of the top VA-approved mortgage brokers Chicago has to offer. Please don’t hesitate to get in touch with us today to find out more or apply for a mortgage – our friendly, skilled team is waiting here for you and will help you get the information you need.


A and N Mortgage Services Inc, a mortgage broker in Chicago, IL provides you with high-quality home loan programs, including FHA home loans, tailored to fit your unique situation with some of the most competitive rates in the nation. Whether you are a first-time homebuyer, relocating to a new job, or buying an investment property, our expert team will help you use your new mortgage as a smart financial tool.
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Ten Reasons Why You Need a Mortgage Broker

Now is a great time to consider buying a home. Interest rates have reached unprecedented lows in recent months, making the costs of undertaking a mortgage incredibly attractive. 

With all of the information available to seasoned and first-time home buyers, it almost seems like all mortgage providers will give you a great rate, making it virtually impossible to secure a bad deal on a home loan right now. Popular thinking would have you believe that you could just reach into a hat, choose the name of any bank or lender, and end up with a great deal.

Unfortunately, that’s not usually how it goes. Taking that kind of risky approach to something that will impact you and your family for years to come borders on irresponsibility. 

Tapping into the skills and experience of a qualified, independent mortgage broker can be one of the greatest resources you can use during the homebuying process. And great mortgage brokers won’t cost you money—they’ll save you money!

Read on for ten reasons you should consider working with a mortgage broker.

  1. Working with a mortgage broker is easy.

You already have enough to do throughout the process of buying a home. A mortgage broker will help to take the home loan search process off of your hands. As an independent, certified professional, they’ll make sure that your application process goes smoothly.

They will do much of the tedious, difficult groundwork for you. With that taken care of, you can quickly determine what options are available to you and select the best loan for you and your unique set of circumstances. 

  1. Mortgage brokers have lots of experience.

They work with home and investment loans all day, every day, so they know them thoroughly. You can expect that a typical mortgage broker helps hundreds of clients secure loans each year, so they know what they’re doing and how to find the best deal for you.

Because they know what to look for, mortgage brokers can quickly start to understand your particular situation and help you find the right home loan for your circumstances. By working with a mortgage broker, you have the advantage of access to years of knowledge of mortgage loans and terms. It’s great to have an expert in your corner.

  1. Mortgage brokers offer tremendous convenience.

Thanks to a certain level of independence, mortgage brokers can usually accommodate your schedule. Whether you work long hours or need to meet at a specific location on your way from your last appointment, they can generally make it work. This flexibility can save you a bunch of time and hassle on top of the time that they can already save you by streamlining the selection process.

  1. Mortgage brokers offer access to the most options.

It can be tempting to limit your search options to familiar lenders, like the bank that you deal with regularly. But in today’s highly competitive climate, there’s no reason to do that.

With the tools and relationships at their disposal, mortgage brokers are positioned to expand your search options. They have the ability to quickly comb through hundreds of home loan options from dozens of different lenders. 

This access means that you can get the benefit of sifting through hundreds of opportunities from so many sources without doing any of the added legwork yourself. You can easily capitalize on the market offerings in their entirety so that you’re assured of securing the best mortgage. 

  1. Mortgage brokers can be great teachers.

Of course, a good mortgage broker will walk you through what needs to be done to get you the best loan, but a great mortgage broker will take you under their wing throughout the process. They will happily teach you about what to expect every step of the way and explain the financing process to you in terms that you can understand. They’ll help you learn to identify marketing trends and explain the process of legally transferring property, too. 

A great mortgage broker will give you tips for dealing with real estate agents based on their experience that you can carry on into your house hunt. They can set clear and realistic expectations that will help your agent find the home that’s right for you. Thanks to their expertise, they are well-equipped to educate and inform you about this process. Teaching you lends added comfort throughout the process and gives you a great resource of information if you ever find yourself looking for another mortgage in the future. 

  1. Mortgage brokers can help you speed up the process.

Consider mortgage brokers like your keys to the fast track. Current real estate markets are relatively flat, with a large number of buyers clamoring for few homes on the market over the past several months. 

They are well-suited to manage this situation because of their excellent working relationships and established reputations. Generally, working with a mortgage broker will shave a few days off of the application process compared to having you attempt to get things done on your own. 

  1. Mortgage brokers are there for you for the long haul.

One of the crucial traits of a great mortgage broker is their relationship-building abilities. While it’s important to build and maintain relationships with banks and lenders, your mortgage broker will also work to build a relationship with you. 

Expect that they will be with you as you secure a home loan and well into the future. If circumstances change, for example, and they think that you might be able to get a better deal elsewhere, they’ll let you know and help you get it done. 

If you decide to refinance or buy another home somewhere else, they are ready to help with that, too, so you won’t have to start over again. Anticipate that you’ll be able to pick up where you left off.

  1. Mortgage brokers have the right tools for the job.

They have sophisticated systems, including loan rate calculators, to streamline the mortgage application process to save you time and energy. 

You can certainly go to any lender’s website, jump through all of the hoops, and cross your fingers if you’d like. But if you have any unconventional circumstances, like a low salary, single income, current unemployment, or anything outside of fairly ideal circumstances, you may be rejected. If you decide to apply to another lender, your credit report will show that an inquiry has been made, further hindering your chances. 

A mortgage broker knows the ropes and can help you navigate these systems based on what you bring to the table combined with their experience and understanding. Their software will build a profile of you, your financial situation, and what you’re looking for. 

Then they can determine what loan products are available to you and what you should expect as far as lending requirements. If you need to improve certain areas before you have a successful application, they’ll let you know. This way, you’ll have a pretty good idea of what you can borrow and how likely you’ll be to get your home loan before you potentially injure your credit history.

  1. Mortgage brokers can help clear things up for you.

There are plenty of opinions regarding home loans—everyone seems to have their unique perspective and limited experience. You can also seek out your information or save yourself time, effort, and headaches by counting on a mortgage broker to separate fact from fiction and make sense of what you need to know to get the best mortgage for you.

They can help you understand terms like offset or overdraft that can be thrown around through the home loan application process. They can help steer you in the best direction as far as lenders’ mortgage insurance or low-doc issues are concerned, so you don’t waste time in an uncomfortable sort of limbo with inaccurate information.

  1. Using a mortgage broker is free.

Here’s the clincher—you can tap into a mortgage broker’s expertise with no money out of your pocket!

All the other reasons listed above point to the time, money, and effort you’ll save, plus the ease of relying on a mortgage broker’s knowledge and experience. Since all of that is yours for free, there’s no good reason why you shouldn’t use one.  

Lenders pay mortgage brokers a commission at the close of every transaction. Even better, these commissions are highly regulated, so there’s no benefit for them to recommend any product or lender above another. These protections ensure that you receive the best deal.

Find The Right Mortgage Broker For You

Mortgage brokers are the link between buyers and lenders, and can substantially improve your quest for the perfect mortgage. They are skilled at navigating a competitive field, and their involvement can save you precious time and money, all without any additional costs to you. 

Here at A and N Mortgage, we have a team of experienced mortgage professionals who are eager to help you find the right loan product and secure funding with the best terms.

A and N Mortgage Services Inc, a mortgage banker in Chicago, IL provides you with high-quality home loan programs, including FHA home loans, tailored to fit your unique situation with some of the most competitive rates in the nation. Whether you are a first-time homebuyer, relocating to a new job, or buying an investment property, our expert team will help you use your new mortgage as a smart financial tool.

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Pros and Cons of Refinancing Your Home Mortgage Loan

Interest rates are at historic lows. As a current homeowner, you may be wondering if it’s worth your time to consider refinancing your mortgage. If you bought your home when the Fed’s interest rates were at least 1.5%, or 150 basis points higher than they are right now, you may be thinking about how much money you could save on interest payments by refinancing your original loan at today’s lower rates.

There’s an incredible savings potential for those who are able to successfully refinance their mortgage with more favorable terms. Still, knowing whether or not you should refinance isn’t always a clear choice from the beginning, depending on your unique circumstances.

To facilitate your decision-making process, here are a few of the main pros and cons of refinancing your mortgage in light of current market dynamics. As you consider these points, you’ll get a better idea of how your decision to refinance may impact your finances and future housing security.


Save Money Due To Lower Interest Costs

Mortgage costs are made up of two primary components: the principal and interest costs. Refinancing at lower interest rates can reduce your overall borrowing costs over the life of your loan. If it costs less to borrow the money for your mortgage, you can save hundreds of dollars every month in interest payments.

There are several factors to take into account to determine how much you can save, like the type and structure and rate of your current loan. Depending on your existing mortgage, here are a few of the ways that you may be able to reduce your interest costs:

  1. Lower interest rate: If rates have fallen, your credit risk remains the same or improved since you secured your original mortgage, and you may be able to obtain a lower interest rate. When you refinance from higher-interest debt, expect the lender to look at your current credit score, income, and debt-to-income ratio to determine your ability to repay your loan.
  2. Shorter loan term: If you reduce the loan term, you’ll pay less interest because there simply isn’t as much time for interest to accrue. Even though you will ultimately be saving money, you may wind up with a higher monthly payment over a shorter loan duration.
  3. Switching from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage: Refinancing from an ARM to a fixed-rate mortgage will remove the risk of rising interest rates if they increase in the future, shielding you from potential interest-rate hikes.
  4. Refinancing from Jumbo to conventional loans: Jumbo loans exceed the conventional (conforming) loan limits determined by the Federal Housing Authority (FHA) each year. Once the balance on a jumbo loan drops below that threshold, refinancing to a conventional loan (generally offered at lower interest rates, since they are for smaller loan amounts and carry less risk) can save you money.

Lower Your Monthly Payments

Refinancing to a lower interest rate loan with the same terms will often result in lower monthly payments. Another, less desirable way to reduce your monthly payments is to refinance to a loan with a longer-term. Since you would pay over a longer duration of time, your individual payments may be lower, but you’ll generally have a higher overall borrowing cost as interest costs accrue.

Make Your Loan More Predictable

ARM’s have interest rates that can increase or decrease at each specified interval. A common term for adjustable-rate mortgages is the 5/1 ARM. This loan configuration keeps your introductory (often preferable) rate locked in for the first five years. After that, your interest rate can change every year. Refinancing to a low, fixed-rate mortgage can save you money compared to higher variable rates if interest rates increase.

Eliminate Mortgage Insurance

The FHA mortgage loan program requires that first-time homebuyers maintain expensive annual insurance premiums for at least the first 11 years of the loan (for loans issued after June 2013), sometimes the entire duration of the loan, to protect the lender from default.

Once you achieve 20% equity in your home, you can convert an FHA loan to a conventional loan and eliminate the annual mortgage insurance payment, saving you money each year. You’ll generally accrue that amount of equity before the first 11 years of the loan and well before the full 15 or 30-year loan term.

Affordably Tap Into The Equity In Your Home

Cash-out refinancing can make sense if you need access to low-cost capital. This version of a home equity loan or line of credit gives you cash that you can use on anything, like college tuition, medical bills, student loans, or for funding home improvement projects.

Like a home equity loan, your loan is secured by the value of your home. These funds are often more affordable than credit cards or other personal loans since your lender is at a reduced risk of default with your home as collateral.


While there are many potential upsides to refinancing your mortgage, it can be a time and labor-intensive pursuit. You’re essentially going through a slightly streamlined mortgage process again. There are no guarantees you’ll wind up with a lower rate and the process can be complicated.

Applying To Refinance Your Loan Is Difficult

Before you jump the gun to refinance, know that it requires a lot of effort. Though the process is a smidge easier than securing your primary mortgage, since you’ve already been approved for and are in good standing with your current loan, refinancing isn’t for the faint of heart.

Lenders still require tons of paperwork to verify your employment, income, and identity to ensure that you qualify for refinancing. The process often takes weeks and can be stressful, so don’t commit to the idea unless you’re ready to go through with it.

You May Not Be Approved

When you refinance, the lender will reassess your credit risk. If your credit score has fallen, you’ve recently changed jobs, or your debt-to-income ratio has increased, your application may be rejected. If your borrower profile has degraded and your application is approved, the terms may not be as favorable as anticipated.

Refinancing Doesn’t Guarantee That You’ll Break Even

While the ideal scenario is to refinance to a lower interest rate and save money compared to your original loan, there are a handful of situations where that won’t be the case. For example, there are many upfront costs and fees associated with originating a mortgage loan that are usually rolled into the total costs of the loan. If you have to sell your home soon after you refinance, you may never break even on your new loan thanks to those upfront costs.

Higher Monthly Payments

Cashing out with a home equity loan or reducing your loan term can save you money, but they can also result in a higher monthly payment. Higher monthly payments become an issue if the larger amount strains your monthly budget. If you elect to refinance with a higher monthly payment, make sure that you can withstand the increase.

Down Markets Can Deter Your Efforts

Areas with declining home values and high or increasing rates of short sales and foreclosures are a higher risk for lenders. If those circumstances in your area have deteriorated since you bought your home or last had it appraised, this may lead to a lowball appraisal that will hinder your chances of qualifying for a refinance loan. If you’re looking to refinance a property that fits those criteria and can wait, you may want to postpone until the market improves.


There are many cases where refinancing a home mortgage loan, especially in today’s low-interest-rate climate makes sense. However, there are plenty of pitfalls to consider before you decide to pursue refinancing.

First of all, there are no guarantees. Even if your borrower profile is intact or has improved, there are plenty of other factors, like down markets and lowball appraisals that can foil your refinancing attempt.

If you do successfully refinance your home loan and need to sell your home years before you planned, you may not have reached the point where you’ve broken even after paying all of the upfront costs for this new loan. In that case, refinancing could cost you quite a bit of money. If the housing market sours, you may wind up with less equity than you expected. If you refinance and lose your job, your house and financial stability are on the line, leaving you in a precarious position.

Alternatively, refinancing may be a great option for you. If you’re approved for refinancing your original loan with more favorable terms, you can save thousands of dollars in saved interest costs. Successfully refinancing nonconventional loans can be worth the effort, too.

Historically low-interest mortgage rates in Chicago make home loan refinancing particularly attractive right now. Regardless of the outcome, carefully consider the pros and cons of refinancing in the context of your situation to decide whether it’s worth applying.


A and N Mortgage Services Inc, a mortgage banker in Chicago, IL provides you with high-quality home loan programs, including FHA home loans, tailored to fit your unique situation with some of the most competitive rates in the nation. Whether you are a first-time homebuyer, relocating to a new job, or buying an investment property, our expert team will help you use your new mortgage as a smart financial tool.

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