Are you ready to buy a house? Even before looking at houses, the first thing you will want to do is talk to a mortgage lender to make sure you will be approved for a home loan. Wondering what it takes to qualify for a mortgage? Here are the main steps involved in the pre-approval process.
Complete the Loan Application
The loan application can be completed either online, over the phone or in person with your Loan Officer. This is a snapshot of your current financial picture. You will list your income, assets, work history, address history and other basic personal information. It’s important to complete the application as accurately as possible to avoid unnecessary delays in underwriting down the road. Having an experienced lender guide you through the application process can be very helpful, especially if you have a slightly more complicated financial situation.
Credit Report Review
The lender will pull and review your credit report. They will let you know your credit score, review any potential errors and use the information listed in the report to analyze your monthly payments in relation to your income. The minimum monthly payments on the credit report plus the new expected house payment is typically used to calculate your debt to income ratio - one of the most important factors when qualifying for a mortgage.
The credit report also provides the lender with a history of how well you have paid your bills in the past. Allowing a qualified mortgage lender to review your report can be valuable as they can provide tips on how to improve and maintain a good credit score. According to Consumer Financial Protection Bureau, you can shop around for a mortgage and it will not hurt your credit. Multiple credit checks from mortgage lenders within a 45 day period are treated as a single inquiry.
The lender will ask to verify the information that was entered on the loan application. They do this by reviewing your paystubs, tax returns, W2’s and bank statements. Make sure to have these documents available and ready once you decide to purchase a home.
Review Loan Options
A good Loan Officer will give you several different loan options to consider. The main factors that play into loan product selection are credit score, down payment and the loan terms that fit your goals. The lender can explain what an expected monthly payment will be for each product so you can make an informed decision on the price you want to pay for your new house. Don’t forget to discuss closing costs as they can vary with loan products. A good Loan Officer will be available on nights and weekends to provide monthly payment estimates as you find houses that you are interested in.
Once your documentation has been reviewed and the information on the loan application is verified and satisfactory, your lender will be able to issue you a pre-approval letter. Most Realtors® like to have this document in hand prior to making an offer on your behalf. It makes your bid more attractive. If you are in a multiple offer situation, a pre-approval letter can be the difference in your offer being accepted or not.
Important Note: It is important to understand the difference in each lender’s pre-approval process. Some lenders only provide a cursory review of your information to determine if it is likely that you will qualify. This is typically referred to as a pre-qualification, but some lenders call it a pre-approval.
By comparison, with Triumph Bank Home Loans’ Approved Home Buyer Program, the borrower’s application and documentation is reviewed by an actual underwriter so that the buyer can shop with certainty that their loan is already approved. Approved Home Buyers can also use Triumph Bank Home Loans’ RateShield+ Program which allows the borrower to lock current rates prior to being under contract to purchase.
10 Questions to Ask Your Loan Officer
What differentiates your mortgage company from others?
What lender fees do you charge?
What is the interest rate?
When can I lock in the interest rate and how long is the lock good for?
Do you have loan options that avoid Private Mortgage Insurance?
How long have you been in business and how many loans have you closed?
Once I find a house, how long will it take to close?
Are you available on nights and weekends if questions arise?
Does it make sense to pay discount points in exchange for a lower interest rate?
Do you guarantee on-time closings?
It’s important to make sure you are working with a Loan Officer you trust and have a good relationship with. They will be with you every step of the way as you purchase your new home. Having a strong team of real estate professionals in your corner is the key to making the home buying process more enjoyable and less stressful. A good mortgage Loan Officer is one of the most important members of your team - choose wisely!
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