The most important things you can do to improve your chances of obtaining your dream home is to apply for a pre-approval. Getting pre-approved for your home loan communicates a level of credit and financial worthiness in shopping for a house. In most cases, pre-approval is the key to get the home you’ve imagined for the price you deserve. Once you’ve been pre-approved, there’s no question of your ability to pay a mortgage.
If you’re interested in purchasing a home in the near future, you should obtain a pre-approval. This is because your real estate agent and the seller will ask to see your pre-approval letter before you can make an official purchase offer. This letter will last anywhere from two to three months, depending on the lender.
Stages of Your Home Loan Application
The home loan application process includes three basic stages:
1) Pre-Qualification Stage: An informal process wherein a mortgage professional will ask you about your income, assets, and expenses which will help you to understand your position.
2) Pre-Approval Stage: During this stage, a lender will look at the documentation, check your credit score, and approve you for a specific loan amount. It is important to note that your loan representative is not an underwriter and not the person responsible to offer and approve your mortgage during the pre-approval process.
3) Mortgage Commitment Stage: You cannot reach this stage until you’ve selected a property. Your lender will issue a letter approving you and the property you wish to purchase. Your loan representative will submit your application and approval to an underwriter who will return with final approval, approval with conditions, denied or suspended.
Let us now discuss the 5 major things you’ll need to get pre-approved for your home loan:
Lenders have stopped offering no-documentation or no-verification mortgages after the Great Recession. Now you’ll need to supply recent pay stubs to prove your regular income, W-2 statements from the past two years, two most recent tax returns and proof of additional income including bonuses, alimony or inheritance if you would like that income considered.
Although pay stubs are helpful, they don’t prove you’re currently employed. After the crash in 2008, lenders are wary of awarding mortgages to those without stable employment. So, most lenders will call your employer to verify you have a job and clarify how much you earn. A significant amount of additional paperwork is needed to outline your income and business prospects if you’re self-employed.
In this day and age, it is nearly impossible to get approved for a mortgage without a decent credit score. The vast majority of lenders reserve the lowest interest rates for those with an impressive credit score of 740 or more. You’ll need to supply a larger down payment or pay a higher interest rate if you have a lower score. If you want an FHA loan then you’ll need a score of 580 or more with 3.5% down.
You’ll need to print your last 2 months bank statements which show you have the money to cover a down payment and closing cost. The amount of your down payment will depend on your loan. Under an FHA loan, you’ll need to pay only 3.5% of the cost of the home. Under a conventional loan, you’ll need to supply anywhere from 5% to 20% of the total.
Finally, you’ll need a series of general documentation including your driver’s license and your signature on the letter of approval to conduct a credit check. Bring any documentation you feel could help in proving your value, stability, and assets to keep the process straightforward.
If you need help with getting the pre-approval process for your home loan, then start your loan application process with Primary Residential Mortgage Inc. Our team offers a fresh approach to buying and refinancing. You can talk to one of our specialists who will provide guidance about pre-approvals, loan availability and the interest rates to make your loan process quick and simple.
PRMI NMLS 3094. PRMI is an Equal Housing Lender. Some products and services may not be available in all states. Credit and collateral are subject to approval. Terms and conditions apply. Programs, rates, terms, and conditions are subject to change and are subject to borrower(s) qualification. This is not a commitment to lend. Florida Office of Financial Regulation MLD646. Opinions expressed are solely my own and do not express the views of my employer.