Pre-work is annoying but very important
Pre-qualification – Series of questions your potential loan officer will be asking you to see if it is worth their time to take your application. These are some of the questions you may hear:
– Do you have a W2 job or do you own your own business?
– Have you been in the same job field or owned your business for at least 2 years?
– Have you ever had a bankruptcy or foreclosure? If so, when?
– Do you have any idea of what your credit score is?
– Will you have another person on the loan?
– What percentage of purchase price will you put as a down payment?
– Around what purchase price are you looking for?
The answers to these questions will give them an idea of what type of loan would be best for you if any and also, how much work they can expect with your loan. A loan for a person with bad credit and very little money down will require more work from the loan officer.
Applying for a loan – if the questioning goes well, you will be asked to fill out an application. The easiest and most time efficient way is to apply online. You’ll need 2 years worth of personal information (job history, previous homes, income). Also, most applications will have you select an option which give them permission to pull your credit so do NOT apply unless you are ready to buy a home within the next 2-3 months.
Pre-approval (pre-approval letter) – a document or promise showing that the loan officer has reviewed your income, assets and credit and determined you will most likely be approved for a____ loan type, ____loan amount and _____ down payment. You will most likely need to provide the following documentation:
– 2 years worth of the most recent taxes you filed (business and personal)
– 2 years worth of most recent W-2’s
– 2 full months of most recent bank statements that will be used for down payment and closing costs (checking, savings, 401k, etc)
– 30 days of most recent paystubs
The requirements of what is necessary to get a pre-approval varies from loan officer to loan officer. No matter what they require for pre-approval, you will almost certainly need all of these documents to complete your loan so gather them!
The loan officer will run your credit and review the documents that were provided to determine how much income and debts you already have. They will then determine how much more debt you will incur with the home you want to buy. At this point they will start to talk with you about the types of loan options you have and the rates of each. If you do not have an executed sales contract (signed by all parties), you can NOT lock your rate in!! Rates change every day, sometimes multiple times a day so what they are telling you is an estimate, not a guarantee. No matter what sales tactics they give you, they must work with rates that are outside of their control so only pay attention to rate once you have the executed contract.
Get all these documents and the entire mortgage experience will be easier for you and for the people doing your loan. You have to understand that actual people are working on your loan. What I mean by this is, if you get on these people’s good side and provide them all they need before they ask, they will like you and working with you. You’re making their lives easier so they will be more inclined to help you in any way they can. Let’s get on their good side and stay there!