PRE-QUALIFY AND PRE-APPROVE
Buyers apply for a loan and obtain approval before they find the home they want to buy. Why?
Pre-Qualifying will help you in the following ways:
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Generally, interest rates are locked in for a set period of time. You will know in advance exactly what your payments will be on offers you choose to make.
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You won’t waste time considering homes you can’t afford.
Pre-approval will help you in the following ways:
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You can select the best loan without being under pressure.
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Your Broker will need to submit your Lender's letter with your offer to purchase.
How much home can you afford? There are three factors to consider:
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The down payment and closing costs
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Your ability to qualify for a mortgage and the monthly payment
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Homeowner Association (HOA) Fees, taxes, mortgage insurance, special assessments all need to be figured into your monthly expenses
What are the down payment requirements?
Most (but not all) loans today require a down payment of at least 3%-5%, depending on the type and terms of the loan. If you can pay 20% or more down, you can usually eliminate the mortgage insurance. There are a number of down payment assistance programs available to help with both the down payment and with closing costs.
What are closing costs and how much do I need to bring?
You will be required to pay fees for loan and other closing costs. These fees must be paid in full at the final settlement unless you are able to include them in your financing. Total closing costs can range from 2% to 5% of your mortgage loan, and include the loan origination fee, processing costs, pre-paid fees, title insurance and escrow fees. The Seller will sometimes agree to pay some or all of these fees.
How do I qualify for a mortgage?
Most lenders will allow your monthly payment range to be between 28% and 38% of your gross monthly income, depending on your monthly obligations. Your mortgage payment to the lender includes the following:
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The principal on the loan (P)
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The interest on the loan (I)
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Property Taxes (T)
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The homeowner’s insurance (I)
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Private mortgage insurance (PMI)
Your total monthly PITI and all debts (from installments to revolving charge accounts) should not exceed 38% to 40% of your gross monthly income. The following are key factors that determine your ability to secure a home loan:
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Credit Report
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Assets
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Income; and
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Property Value
LOAN APPLICATION CHECKLIST
These items are not all inclusive. You will want to bring or fax the following to the loan officer:
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Social Security # and picture ID for all appointments
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Copies of checking and saving account statements for the past 6 months
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Copies of others assets, stocks, bonds, annuities, IRA’s, etc
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Recent paycheck stubs- 2 years worth
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List of all credit card accounts and all monthly debts owed
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List of all other loans and debts with account numbers and balances due
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List of all other monthly financial obligations, alimony, child support, etc.
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Employment history and verification (or contact names and numbers)
Other items:
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Monies to cover application fee, appraisal, etc
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Rental history, including verification of on time rent payments
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Verification of other miscellaneous income
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Estimated value of all personal property owned
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Bankruptcy discharge documents and list of creditors
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Letter of explanation for any adverse credit history
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Divorce decrees, property settlements, quit claim deeds, etc.
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For VA only, bring form DD214 and certificate of eligibility
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Anything else requested by underwriter to secure the loan
Note:
Client(s) with bankruptcies and/or other credit problems should expect a much longer approval process, with additional documentation often requested.