The mortgage industry was a dominant contributor to the financial crisis in the late 2000’s. The industry has emerged from the crisis with less players and more regulation. Although mortgage loans are readily obtainable, more borrowers are required to jump through more hoops to get to the finish line.
A pre-approval from a reputable home lender is the first step in the home buying process. With a pre-approval letter in hand, the buyer is communicating to the seller and the REALTOR® that they are serious about the process. Nothing is more frustrating for a seller than opening up their home to a buyer who does not have the purchase ability.
Most REALTORS® will not entertain buyers without the pre-approval letter. The end goal of all buyers, sellers and REALTORS® is a successful closing. An offer from an unqualified buyer is of no value.
The following are a few tips for a smooth and efficient pre-approval process.
- Shop around for a mortgage lender. Although loan products and programs are typically similar, it is important to work with a trusted advisor in the process.
- The lender will be looking to document income, credit, and assets to determine the house payment and loan amount a buyer can afford. Be prepared for the pre-approval application and bring all documentation requested.
- Typical documentation includes 2 years’ W2 statements, 2 years’ income tax returns, one month of current pay stubs, and 2 months’ bank statements.
- Special documentation would include divorce decrees, verification of paid off accounts, and credit explanation for adverse credit.
- Be prepared that as situations are uncovered more documentation may be needed.
Remember a pre-approval is conditional. Change in buyer’s credit, income, or assets can alter the pre-approval. Interest rates are subject to change and can affect payments and approved loan limits. In addition pre-approvals are generally limited to 60 days. Always communicate to your lender changes in your circumstances along the way that may affect the pre-approval.
A true pre-approval is one in which the lender has reviewed and documented income, assets, and credit. A pre-qualification should not be confused as a pre-approval. A pre-qualification does not require documentation and therefore carries little weight. The benefit of a true pre-approval is that it will provide confidence to the buyer, seller, and REALTOR® that you can make a viable offer, an offer resulting in a successful closing.
This specific blog is so important to all buyers. I asked a very credible loan originator, John Kreuz of NOIC, to help me with its writing because I wanted it from an expert’s perspective. If you would like to talk with very credible individual and lending company, please call John at (419) 265-0145. He will give you the honest advice you deserve!