Employment And Income History
When you apply for a mortgage, lenders go to great lengths to ensure you earn a solid income and have stable employment. That’s why lenders request two years’ worth of W-2 tax forms and contact information for your employer. Essentially, lenders want to ensure that you can handle the added financial burden of a new mortgage.
Youll also be asked to provide salary information, so a lender has evidence that you earn enough money to afford a mortgage payment and related monthly housing expenses. You’ll also have to provide 60 days of bank statements to show you have enough cash in hand for a down payment and closing costs.
What If You Cant Get Pre
Not everyone will get pre-approved for a mortgage, but there are a few things you can do to get better prepared for the financial responsibility of homeownership:
- Work to improve your credit score. Your credit score is impacted by payment history, outstanding debt, the length of your credit history, recent new credit inquiries, types of credit used, and more. Generally a score of 720 and higher will get you the most favorable mortgage rates.
- Correct any errors on your credit report, which could help to raise your credit score. The lender will analyze your credit report for any red flags, such as late or missed payments or charged-off debt. Even if you are deemed to have bad credit, there are ways to still get pre-approved for a mortgage.
- Decrease your overall debt and improve your debt-to-income ratio. In general, a debt-to-income ratio of 36 percent or less is preferable 43 percent is the maximum ratio allowed. Use our debt-to-income calculator to determine your debt-to-income ratio.
- Increase your down payment amount in order to qualify for a larger loan. Learn more about down payments.
Be sure to ask your lender for tips on how you can improve your chances of qualifying for a loan.
How Does The Pre
The information that you entered is calculated and will give you more detailed estimates of the home purchase price and loan amount that you can afford along with the down payment amount that would be required. You will also see your debt-to-income ratio which reflects your ability to manage monthly payments and repay debts.
The last section of the mortgage pre-qualification calculator will give you a total monthly payment and amountbroken down into principal, interest, taxes and insurance detailthat you can afford based on the information you provided.
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Is It Free Or Do I Have To Pay An Application Fee
This will depend on the lender. Sometimes, they will waive the application fee as an enticement to bring in more borrowers . In other cases the application fee will be rolled into your closing costs, which you must pay when you close on the loan. You should ask about this before you submit your application.
If there is a fee, find out if it’s refundable. Some mortgage lenders will charge a non-refundable fee for their pre-approval services. They collect this fee when you submit your application paperwork. On average, application fees cost between $300 and $400. Non-refundable means you don’t get the money back, if you end up walking away. Other lenders offer free mortgage pre-approval in order to gain your trust .
What To Keep In Mind
Before you buy, remember your next home is an investment. So be sure your next property and its location meets your housing needs. Draft a list of pros and cons to help. Ask yourself why you want to move and be realistic about how much you can afford.
Estimate your available equity and find out how much you may qualify to borrow with our home equity calculator.
An investment property can deliver a nice profit. Sources of income vary:
- Renovate and sell it at a higher price
- Rent it out for a monthly income
- Hold it until it increases in value, then sell and take the profit
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What’s Involved To Get Your Pre
The six factors that lenders use to qualify you for a mortgage loan:
- Your income
- The property’s value
- Your proof of identity
We’ll help you assess and understand how a lender views your loan application, and what they look for in terms of a strong application.
A strong mortgage application will have these features:
- A housing expense ratio no greater than 39%
- A debt-to-income ratio no greater than 44%
- Proof of steady income
- Good credit standing
- A house that is worth the price the buyer is paying
- You’ll also need to qualify according to the latest federal stress-test rules, which may lower the amount of mortgage loan for which you qualify
Consider Locking In Your Rate
Usually, you can apply for whats called a mortgage rate lock a guarantee from a lender to honor a specified interest rate for a set period once a seller accepts your offer.
Some lenders will let you lock in a rate once youve been preapproved, although you may need to pay a fee to extend the rate lock if it expires before you buy a home.
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What Documents Do I Need
What documents are needed for mortgage pre-approval? This is another common question among first-time home buyers. The list of documents will vary, depending on which lender you use. But most of them will ask for some or all of the following items:
Your lender will give you a complete list of the documents they need, at the time you submit an application. They might even have this list published on their website somewhere.
What To Provide To Your Lender Or Mortgage Broker
Before preapproving you, a lender or mortgage broker will look at:
- your assets
- your income
Youll need to provide the following:
- proof you can pay for the down payment and closing costs
- information about your other assets, such as a car, cottage or boat
- information about your debts or financial obligations
For proof of employment, you may have to provide:
- a proof of your current salary or hourly pay rate (for example, a recent pay stub
- your position and length of time with the employer
- notices of assessment from the Canada Revenue Agency for the past 2 years, if youre self-employed
Your lender or mortgage broker may ask you to provide recent financial statements from bank accounts or investments. This will help them determine if you have the down payment.
Your debts or financial obligations may include your monthly payments for:
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Pick The Best Mortgage
Choosing the right mortgage is more than just picking the one with the lowest interest rate. There are many different types of mortgages, and some will be better than others for your situation.
As a rough outline, there are three main categories of loans.
Conventional Loans: These are best for people who have a solid credit score and a large down payment saved up.
Government-Backed Loans: These allow people with small down payments and low credit scores to still get a mortgage. Some have regional restrictions, and others are limited to certain groups, such as VA loans for veterans and their families.
Jumbo Loans: Theseare for those with deep pockets. Lenders can only lend conventional loans up to a certain amount . Folks who want to buy a house more expensive than that will need a jumbo loan.
You may also qualify for government assistance, such as the first-time home buyers tax credit. Just remember that if you dont live in the home for three years, youll have to make first-time homebuyer installment payments to pay it back.
How To Use The Mortgage Affordability Calculator
To use our mortgage affordability calculator, simply enter you and your partners income , as well as your living costs and debt payments. The calculator can estimate your living expenses if you dont know them.
With these numbers, youll be able to calculate how much you can afford to borrow. You can change your amortization period and mortgage rate, to see how that would affect your mortgage affordability and your monthly payments.
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When Should I Get Pre
Always pick your yard based on your Summer lifetstyle.
Wondering when to get pre-approved for a mortgage during the home buying process? In this episode, we discuss when and how far in advance of buying a home should you look to getpre-approved. We also explore how long pre-approvals last for, what happens if your financial situation changes and how many times you can get approved.
Prefer to listen?
Today the question we’re going to answer is :
Why Should You Get Pre
There are many reasons why you should get pre-approved. The most important reason is that you will get an accurate idea of how much home you can afford. This can help to target your home search and ensure you only look at houses that are truly in your price range. A pre-approval letter also helps you prove to real estate agents and sellers that youre a credible buyer and able to act fast when you find the home you want to buy. Some sellers might even require buyers to submit a pre-approval letter with their offers, though having a pre-approval letter does not guarantee that your offer will be accepted by a seller. A pre-approval letter can make you stand out in a competitive real estate market. If you make an offer on a house without a pre-approval, your offer may not be taken as seriously as an offer from another person with a pre-approval.
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How Many Times Can I Get Pre
As many times as you want.
Technically until you’re ready to purchase. Once again, we want this to be a very enjoyable experience.
We want you to be able to find your perfect dream home, and sometimes it takes a little bit longer to get that dream home. We don’t want you to feel rushed.
We don’t want you to feel that you were forced into a situation or something.
It is going to be your ideal home. It’s going to be one of the biggest purchases in your life that you’ll do, one of the biggest investments you’re going to get into.
We definitely want to make sure you find the absolute best for yourself .
What Details Are Required In The Pre
A lender will generally start by asking for some basic information about you and your financial history. If you have a co-borrower, the lender will also need this information about them. Generally, a lender will then request your Social Security number and permission to pull your required credit report . If the information you provide and the information obtained from your credit report satisfies the lenders guidelines, the lender will make a preliminary determination in writing stating that you would qualify for a particular loan amount subject to the conditions outlined in your pre-approval letter. Please note that each lender has its own standards and processes for determining whether to grant a pre-approval letter.
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What Documents Are Needed For A Mortgage Preapproval
- Pay stubs from at least the past 30 days Your current income is a major consideration in getting preapproved for a loan, so your lender wants to see that you have a reliable, predictable cash flow coming in.
- Federal income tax returns from the last two years These will help verify your employment history and show the lender a longer-term track record of your income.
- Bank statements from at least the past two months Lenders like to make sure all your money is accounted for, so they want to check your bank statements to see that there arent any major unexplained deposits or withdrawals that could affect your loan.
- Investment account statements Returns on your investments can count as income, and lenders need to know about all your sources of money, not just your day job.
- Documentation related to any gift funds youre receiving If a family member or friend is giving you money to help you buy a home, put together a document signed by them explaining the gift and the amount, and that the gift will not need to be repaid.
- ID (such as a drivers license or passport Lenders need to make sure they know who theyre giving their money to, so theyll want to verify your identity and that youre a U.S. citizen. Foreign nationals can get financing, but its much more complicated.
What Does A Mortgage Pre
A mortgage pre-approval letter shows you how much a lender is willing to let you borrow. Itll typically include the following information:
- Purchase price
- Expiration date
- Interest rate
Credibles streamlined pre-approval letter is similar. In our letter, youll see the purchase price, loan amount, and expiration of the pre-approval based on the information you provided us. You can see an example of this below. A full copy of the pre-approval letter will also list the steps youll need to take should you find a home and want to move forward with Credible.
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Submit Your Loan Application
Once the offer on your house is accepted, you can apply for a home loan. With Credible, you can easily complete the whole process online.
Getting pre-approved for a mortgage can make you a more desirable buyer, and can give you an idea of how much you can really afford to spend on a home, depending on your financial situation.
Ready to get pre-approved?
- Instant streamlined pre-approval: It only takes 3 minutes to see if you qualify for an instant streamlined pre-approval letter, without affecting your credit.
Home Loans Preapproval Checklist
- A drivers license or U.S. passport
- A Social Security number or card. If not a U.S. citizen, a copy of the front and back of your green card
- Verification of employment
- Copy of their credit reports from the three national credit bureaus
- Recent pay stubs covering the last 30 days
- W-2 forms from the previous two years
- Proof of any additional income
- Last two years of personal federal income tax returns with all pages and schedules. If self-employed, last two years of individual federal income tax returns with all pages and schedules, as well as a business license, a year-to-date profit and loss statement , a balance sheet, and a signed CPA letter stating you are still in business
- Bank account statements proving that you have enough to cover the down payment and closing costs. If someone is helping you with the down payment, a gift letter stating that the fund is a gift and not an IOU
- Last quarterly statements for asset accounts , IRA, stock accounts, mutual funds)
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What Should I Get Preapproved
In todays housing market, it will be almost impossible to get a seller to consider your offer unless you have a mortgage preapproval . There are simply too many buyers for sellers to be willing to take a chance on one who hasnt at least talked to a lender about getting a mortgage.
Another important reason to get preapproved: It gives you an idea of how much home you can afford based on how much money a lender is prepared to let you borrow. This can save you time during house hunting by eliminating properties out of your price range.
Does The Amount Of Times That You Get Pre
It really just depends on how the bank is doing it.
Sometimes when you get pre-approved for a mortgage some banks might do a soft credit check.
Just means that they’re just doing an inquiry. Some banks might do a hard inquire, which just means that they’re actually applying for a mortgage.
Any situation, if you’re applying, it could affect how many times you’re applying with different banks. Ideally if you’re with the same bank it shouldn’t affect your score that much.
Every time a lender or a bank looks at your credit bureau, they actually hold it for 90 days. After the 90 days, they might need to do another one, or they might choose to keep the same one. It really just depends on situation to situation and lender to lender.
Karl Yeh: Perfect. Do you have anything else to add?
No. I think that’s pretty much it. Like I said, a pre-approval is very important, and like I said just get out there, get pre-approved, and feel confident in knowing how much you’re pre-approved for.
Well, thank you very much Mo. Thank you very much everyone for joining us, and we’ll catch you next time.
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Can I Start This Process Online
Yes, you can submit an application for mortgage pre-approval online. But you will probably have to follow it up by sending your financial documents. Lenders use the online process just to get the ball rolling. It’s a good lead-generation tool for them, and it’s convenient for you.
Once you fill out the form and click the “submit” button, you’ll probably hear from a loan officer or broker within a few hours. They will follow up by phone or email to request additional information. But it’s a good way to get the ball rolling. So go for it.
Documentation Required To Get Pre
To get a full pre-approval, youll need to be prepared to provide the following documentation:
- Pay stubs Youll need to provide your most recent pay stub, which must show your year-to-date earnings. Youll need a pay stub for each job you have, and for each person applying for the pre-approval.
- W2s Many mortgage lenders will require your W-2 for at least the most recent calendar year. However, some lenders may require them for the past two years.
- Completed, signed income tax returns Youll need to provide these if youre self-employed, or have substantial real estate, investment, or partnership income. They should include all pages of IRS Form 1040, including schedules.
- Asset statements For bank accounts or taxable investment accounts, youll need to provide statements covering the most recent two months, or the most recent quarter. For retirement accounts, youll need to provide something similar.
- Gift information If some or all your down payment will come from a gift, youll need to provide the amount of the gift, when it will be available, who the donor will be, and what their source of funds for the gift will be. The lender will likely request that the donor complete a formal mortgage gift letter, that will request specific details.
- This can usually be satisfied by providing your drivers license. In some cases, the lender may request a copy of your Social Security card. These documents will be requested to verify your identity for federal compliance purposes.
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