Everything That A Homebuyer Needs To Get Pre
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As you search for a home, getting pre-approved for a mortgage can be an important step to take. Consulting with a lender and obtaining a pre-approval letter provides you with the opportunity to discuss loan options and budgeting with the lender this step can serve to clarify your total house-hunting budget and the monthly mortgage payment that you can afford.
As a borrower, its important to know what a mortgage pre-approval does , and how to boost your chances of getting one.
How Long Does A Mortgage Preapproval Take
Some lenders offer same-day mortgage preapprovals that include electronic verification of your employment, credit and assets. Others may take several days, depending on how complicated your financial situation is. Ask lenders upfront what their timelines are. Expect a longer wait if you have credit bumps or are self-employed.
How Can I Increase My Mortgage Pre
Make sure that the prospective lender has accurate information, particularly on income and liabilities that you may have. You can ask to see the credit report that the lender used, and if you believe that it contains errors, you can contact the relevant credit bureau. Youll also need to contact the company that provided the information. You can also try other lenders, which might have different criteria. Remember, however, that multiple credit checks in a short time period can hurt your credit score.
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Can You Get Denied After Being Preapproved For A Mortgage
Yes, you can get denied for a mortgage loan even after being preapproved for it. There are a number of reasons this could happen. For example:
- After preapproval, new negative information could appear in your credit history, dropping your score below the lenders qualification guidelines
- If you lost your job prior to closing on the loan, youd likely be denied. Thats because the lender can no longer verify youll be able to make your monthly payments
- Running up too much credit card debt before the loan closes
Basically, anything that significantly impacts your financial picture between your preapproval and loan closing could change your mortgage eligibility.
Also keep in mind that a preapproval typically happens prior to beginning your home search. As such, your new home must also be approved by the lender.
For example, the loan amount cant exceed the homes appraised value. And if youre getting an FHA loan or a VA loan, the new home must meet government safety standards. The presence of lead paint in an older home, for example, could derail the homebuying journey.
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Why Consider A Second Mortgage
Second mortgages are more commonly known as home equity loans. It is a special type of home loan which allows you to use the existing equity as collateral. Second mortgages dont force you to make changes to your primary mortgage. It allows homeowners to borrow from their home equity without refinancing their original mortgage.
Larger banks typically dont offer secondary financing. If they do, they tend to be home equity lines of credit. The benefit of these is that they are low-interest. However, new government regulations for credit lines make them difficult to get approval for.
In contrast, qualifying for second mortgages is significantly easier. Although interest rates tend to be higher it is easier to get approved for the additional funds you need. Additionally, the more equity that is in the home makes approval easier.
Funds can be used for:
- Improving credit score
- Paying bills and mortgage while unemployed
The money you borrow using the equity in your home has little to no restrictions.
Types of Home Equity Loans
There are two types of loans: fixed-term loans, and home equity lines of credit.
A Home Equity Line of Credit is loan approval for a set amount. Funds are accessed when needed like a credit card. Payments are made based on the amount owing. Once paid off credit can be reused for other purposes.
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The Bottom Line: Knowing What You Need For A Mortgage Preapproval Can Help Speed Up The Process
A lender wants to make sure that youll be able to pay back your loan and arent too much of a risk to lend to. In order to do this, they will need to verify your income, assets and debt. To ensure this process goes smoothly, we recommend preparing all of these documents before starting the home buying process. By ensuring that you have all the information required by your lender, you can quickly progress to the next step in your homeownership journey.
If you have more questions about getting mortgage approval, contact a Home Loan Expert today.
Get approved for a mortgage.
Find out how much you can qualify for.
And Why Apply For One
Unless you have enough cash to buy your home outright, one of the first things youll do before you buy a home is apply for a mortgage. A mortgage pre-approval means youll have a better understanding of your budget and that you can be more confident that youll have the financing in time to close on your home.
Get in touch with Flyhomes Mortgage for more information about how we can help you finance a home you love in less time.
Homebuying, meet simplicity.
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A Good Broker Not Only Knows The Market They Know Your Market
What we mean by this is that most mortgage brokers say theyre whole of market but actually mostly deal with customers who many would consider straightforward borrowers. These brokers arrange lots of mortgages, getting top rate deals for customers without issue. And many of them are very good at it.
However, as soon as a customer walks through the door and they have bad credit, unusual self-employed income, or just a unique scenario that the broker hasnt come across before, most brokers will struggle to know how to help.
Typically, the broker will do some research into banks and building societies on the rates tables until they find one to fit. This is often an extremely time-consuming process, and if the broker doesnt fully understand the situation or know which mortgage lenders would consider the applicant, then they may give up before finding a solution.
The process of getting a mortgage approved in a more specialist scenario like this can also be very different, and its important each application is presented in the right way, so the underwriters can understand the reasons for lending and give the best possible chance of approval.
A specialist broker, someone who handles these types of application on a daily basis, already knows how to get a mortgage approval before the customer even walks through the door.
Document Your Income And Assets
Your lender will require documentation to support the info in your loan application. This is what makes getting preapproved different from getting prequalified.
Typically, your lender will require the following documents for mortgage preapproval:
- Identifying documents such as a valid drivers license or photo ID
- Last two years W-2s and/or 1099s
- Last two years tax returns
- Profit & Loss statement if self-employed
- Pay stubs for last 30 days, if applicable
- Statements from bank accounts, retirement accounts, and other asset accounts
- Divorce decree or separation agreement, if applicable
- Contact information for your landlord for the last two years, if youre a first-time home buyer. If you are currently a homeowner, your housing payment history will show up on your credit report
To speed up the preapproval process, it helps to have these documents in hand before you get started.
Some lenders can pull documents directly from your employer and bank, but not all. Some can also verify your income with the IRS, with your consent.
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How Long Does A Preapproval Last
Many mortgage preapprovals are valid for 90 days, though some lenders will only authorize a 30- or 60-day preapproval.
If your preapproval expires, getting it renewed can be as simple as your lender rechecking your credit and finances to make sure there have been no major changes to your situation since you were first preapproved. Just keep in mind that this might count as another hard pull against your credit, dropping your score by a few points.
What You Need To Give The Lender For A Conventional Loan
A conventional loan is a standard loan that does not involve a special program like the FHA or USDA. The conventional mortgage is one of the most popular loan products in the world. If you dont qualify for these special loan programs and are getting W-2s each year, you may apply for a conventional loan.
One of the few downsides of most conventional loans is you will pay private mortgage insurance if you put less than twenty percent down.
The mortgage documents you will need for conventional pre-approval include:
- A valid Drivers license
- A Passport
- An Official state or federal ID
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Know What You Can Afford
How much of a mortgage you can afford is affected by several things, including your expected mortgage payments, living costs, debt repayments and other financial obligations. While mortgage lenders will consider all of these, itâs important to be honest with yourself about what you can afford.
Only you can fully understand your financial and lifestyle needs. Things like how much you spend on childcare, groceries or supporting your parents can be missed in the mortgage application process. On top of that, your future plans could change your financial situation. While you donât need to tell your bank if you plan to quit your job or have a child, these events would seriously affect your ability to afford your mortgage. You should also factor in other purchasing costs, like home inspections and closing costs . Remember that youâll have to pay for utilities, upkeep, property taxes and repairs too.
Documents Youll Need If Youre Self
If youre self-employed or own a business, youll also be required to provide your tax documents and business returns for the past 1 to 3 years, depending on your lenders requirements.
Youll also need to show your year-to-date audited Profit and Loss statement. If you cant obtain that statement, youll need to provide a year-to-date unaudited Profit and Loss statement, along with your most recent 60 days of business bank statements.
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Documents Needed For The Mortgage Pre
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When youre applying for home financing, you want to make sure you know how to qualify for a mortgage to keep the process going as smoothly as possible. One of those steps is to provide documents that verify your income, assets, and other major obligations you might have. This will allow the financier to determine how much to approve.
Because the length of the mortgage pre-approval process does take some time, its a good idea to start gathering the documents youll need as soon as you decide to buy or refinance a home. This will make it easier for you and speed up the approval process.
Heres a list of the main documents needed for the mortgage pre-approval process.
What Does A Preapproval Letter Include
A preapproval letter includes your name, the price of the home you gave when requesting the preapproval, the loan amount youre preapproved for and the expiration date of the preapproval.
Some lenders also include conditions related to the preapproval in the letter, such as it only applying to a single-family home instead of multi-family property.
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Opening Lines Of Credit
You can still be denied a mortgage even after being pre-approved for one. Mortgage lenders check your credit during pre-approvaland again just before closingbefore giving you the final green light. In the interim, maintain the status quo in your credit and finances. That means not opening new lines of credit or closing existing lines of credit. Doing so can lower your credit score and increase your debt-to-income ratioboth key reasons for a lender to deny final approval.
Instead, wait until after youve closed on your home to take out new lines of credit . And while its great to pay off a credit card account or loan before you close on your home, closing the account removes that credit history from your report. Length of credit is one of the key factors credit reporting bureaus use to generate your credit score.
Instead, leave the account open and active, but dont use it until after closing.
Some credit card companies may close your account for long-term inactivity, which can negatively affect your credit, too. Keep accounts active by making small purchases that you pay off immediately and in full every month.
Mortgage Preapproval Vs Prequalification: What’s The Difference
When you’re shopping for mortgages, you’ll likely encounter a process called mortgage prequalification, which should not be confused with mortgage preapproval. Mortgage prequalification generates an estimate of how much money you may be eligible to borrowbut no details on interest rates, fees and the likeafter you answer a few quick questions online or over the phone about your income, assets and debts.
Mortgage preapproval is a much more formal process that requires you to complete a detailed mortgage application form , submit supporting documentation to back up your financial claims, and undergo a thorough examination of your credit reports and scores. Because applying for mortgage preapproval is essentially the same as applying for a mortgage loan, you may also have to pay an application fee.
Some real estate agents might like to see a mortgage prequalification before agreeing to work with you. But because a prequalification may not include any examination of your credit history or other documentation proving your finances, it won’t carry nearly as much weight with sellers as a mortgage preapproval.
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Application score: 3/4
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Wide variety of loans to meet unique needs
Get fully preapproved before signing a purchase agreement
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Online application process needs improvement
American Pacific Mortgage offers several specialty home loan programs that can benefit everyone from first-time buyers to people renovating their house. The ability to get fully preapproved before identifying a property allows you to offer sellers a fast closing and possibly beat out cash buyers in a competitive market.
American Pacific Mortgage also has the Peak loan program that helps borrowers qualify based on assets rather than income, helps you purchase a new home before your old home sells, lets you buy a home for up to $1.5 million with only 5% down, and more.
Where we’d most like to see them improve is in the online application process: You have to select a local loan officer to work with before you can apply online, and it’s unclear whether you can complete the application process entirely online.
A Clear Understanding Of The Mortgage Application And Approval Process Can Help You Move Forward And Make Decisions With Confidence
The process of successfully obtaining mortgage financing can be broken down into 7 steps which we divide into 3 distinct stages. The first stage is to have an initial assessment discussion with a trusted mortgage broker to diagnose your situation and determine the best course of action. The second stage is the pre-approval in which a formal application with supporting documents is submitted and reviewed. Finally, in the approval stage, financing is formally requested and the details of the mortgage contract are finalized.
Each step is explained individually below.
Our mortgage application and approval process is an organized and sequential procedure that helps you progress towards your goals with confidence and clarity. A plan helps you define the scope of your objective and anticipate commonly encountered pitfalls. How long the mortgage approval process takes depends on how busy lenders are and how quickly you can provide the requested documents. We use checklists and diligent communication to keep things moving along. The approximate number of business days to complete each step are shown in brackets.
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What Factors Are Considered For Pre
Lenders verify certain borrower information before providing a pre-approved offer. These include verification of employment, income, assets and credit score. A full credit report and credit score are pulled at the time of application vs. a limited credit report that is often used with pre-qualification offers.
Why Is It Important To Get Pre
Getting pre-approved for a mortgage gives a person bargaining power since they have mortgage financing already lined up and can therefore make an offer to the seller of a home in which they are interested. Otherwise the prospective buyer would have to go out and apply for a mortgage before making an offer and potentially lose the opportunity to bid on a home.
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