Stated Income Or Stated Asset Mortgage
This type of mortgage is based on the income that you report to the lender without formal verification. Stated income loans are sometimes also called low-documentation loans because lenders will verify the sources of your income rather than the actual amount.
Self-employed people should be prepared to provide a list of their recent clients and any other sources of cash flow, such as income-producing investments. The bank may also want a copy of Internal Revenue Service Form 4506 or 8821.
Form 4506 is used to request a copy of your tax return directly from the IRS, thus preventing you from submitting falsified returns to the lender. It costs $43 per return, but you may be able to request Form 4506-T for free. Form 8821 authorizes your lender to go to an IRS office and examine the forms you designate for the years you specify, free of charge.
How Long Does It Take To Get Preapproved
Depending on the mortgage lender you work with and whether you qualify, you could get a preapproval in as little as one business day, but it usually takes a few days or even a week to receive and, if you have to undergo an income audit or other verifications, it can take longer than that.
In general, if you have your paperwork in order and your credit and finances look good, its possible to get a preapproval quickly.
When Should You Get Preapproved For A Mortgage
Prospective homebuyers know the importance of “location, location, location,” but timing can be critical too. Securing mortgage preapproval at the right moment in your house-hunting journey can help seal the deal, preserve your credit and spare you unnecessary expenses. Here’s the lowdown on when to seek preapproval.
You May Like: How Do Interest Rates Work On A Mortgage
What’s The Difference Between Preapproval Vs Pre
If you’ve been through this process before or even considered it, you may have also heard about something known as “pre-qualification.” That differs from preapproval.
Pre-qualification refers to far less rigorous assessments of your background. A preapproval requires much more personal and financial information given to your prospective lender. The end result is that pre-qualifying offers may be less reliable than preapproval offers.
How Getting Mortgage Pre
When sellers accept an offer, they want the deal to go through. However, if the buyer isnt pre-approved for a loan, this can put the whole deal in jeopardybecause if the loan doesnt get approved, the buyer will likely be unable to follow through, says Chantay Bridges with TruLine Realty in Los Angeles.
As such, some home sellers wont allow buyers to tour their home without pre-approval, and some real estate agents wont take buyers on tours until theyre pre-approved.
Also Check: What You Need To Get Approved For A Mortgage
Can I Offer More Than My Pre
Yes, you may choose to make an offer that is more than what you were pre-approved for. If your offer is accepted and you go ahead with the purchase, you’ll need to find a way to finance your mortgage. If your offer is significantly more than your loan pre-approval amount, then you may need to make a larger down payment. If the difference is small, you may be approved for a larger mortgage when it comes time to apply for an actual mortgage.
Whats The Difference Between Mortgage Pre
The difference between a pre-approval and pre-qualification is that mortgage pre-approvals get used to buy a home pre-approval cannot.
Home sellers accept pre-approvals as proof of a good offer because pre-approvals get backed by lenders and double-verified. They include credit verification and an assessment of monthly income. A pre-approved buyer can afford to buy a home. Learn more about the differences between pre-approvals and pre-qualifications.
They include no verifications or reviews by a lender. By definition, a pre-qualification is non-reliable as evidence of a buyers ability to buy. As a result, sellers dont accept offers from pre-qualified buyers.
Don’t Miss: How Long Can You Go Without Paying Mortgage Before Foreclosure
Bid For Your New Home
Ready to make an offer on a home? Getting a custom preapproval letter from your lender lets the seller know you are a serious buyer.
It will also give your loan officer a heads up that you may sign a purchase agreement soon, which can help them prepare for the next steps in the mortgage approval process, such as arranging a home appraisal.
Dont Miss: Where Do You Get A Mortgage
Is Mortgage Pre Approval The Same As Pre Qualification
The terms mortgage pre-approval and pre-qualification are often used interchangeably. However, they arent quite the same, as one holds more weight than the other.
When you reach out to the lender to get pre-qualified, they will review the financial and income data you share to determine if you could be a good fit for a loan and provide you with potential loan amounts, interest rates and monthly payments. However, they wont do a hard credit check a soft pull may be done, though.
A pre-approval is a bit more involved, though. Youll need to provide financial information and income documentation. The lender will also check your credit to ensure they account for all the outstanding debt you have. Doing so allows the lender to generate more concrete loan offers.
Recommended Reading: How Much Salary For Mortgage Calculator
It Gives You More Room To Negotiate
In addition to making you a more attractive buyer, a mortgage pre-approval also lends you some flexibility in terms of bargaining and negotiations. Thats because sellers who know that a buyer is already qualified for the offer amount may be more likely to make some compromises if it means the sale is a sure thing.
If you want some repairs or improvements thrown in or if you want the seller to cover your closing costs or purchase a home warranty for you, your mortgage pre-approval will help strengthen your position and may make it more likely that you get what youre asking for.
How Long Is A Mortgage Pre
Mortgage pre-approval validity periods depend on individual lenders. Usually, lenders pre-approve mortgages for a period of 90 to 120 days. You can even request an extension of your pre-approval.
Its important to note that your pre-approval is only valid as long as your financial situation remains the same as it was at the time of your application. Here are some scenarios in which your mortgage pre-approval might cease to be valid:
You May Like: Can I Get A Mortgage If I Have A Loan
What Factors Are Considered For Preapproval
In addition to considering your credit score, lenders will want to verify your employment and income. Theyll also be considering your debt-to-income ratio , which is a calculation of your total monthly debts, divided by your monthly income. This ratio, expressed as a percentage, helps lenders make sure you have enough income to reasonably cover your debts.
The exact DTI needed for mortgage approval varies by loan type. But generally speaking, youll want your debt-to-income ratio to be 50% or lower.
How Long Does A Preapproval Last
Let’s say you’ve received your preapproved mortgage and are ready to take your search for a new home to the next level. You’ll then want to learn how long your preapproval period lasts. In most cases, this time frame usually ranges anywhere from 60 to 90 days. That’s not a hard and fast rule, of course – it will vary depending on your lender and any contributing factors based on your profile.
This is where effective communication with your lender is critical. Ensuring they clearly communicate how long the preapproval extends will help you gauge your time frame for finding your house. That’s why you don’t want to start your search too late. It’s a balancing act, where you don’t want to get serious about your search until after preapproval, but you do want to have a good idea of what you want and what you can afford.
A few things to be cognizant of during the preapproval period:
- Your lender will run a credit check on you that may cause your credit score to go down.
- Try to avoid making major life changes during this period that might affect your credit score. For example, taking on additional debt during this time period is not a great idea if you can avoid it.
- Keep in mind that any major changes all have the potential to slow the loan process from moving forward.
Recommended Reading: Can You Be A Mortgage Broker Part Time
An Expert Mortgage Broker In Your Corner For Now And Later
Why us? Because mortgages are all we do. Unlike the banks, we’re obsessed with providing you with unbeatable service. It’s all about helping you with one of the biggest financial decisions you’ll make.
Our True North Mortgage Brokers are knowledgeable, friendly and easy to get a hold of real people who care about getting your best mortgage fit. We’re here for your lifetime of mortgage needs.
How Quickly Can You Get A Mortgage Pre
Timing is everything when youre buying or refinancing a home. Of the many advantages that online pre-approval offers, speed is one of the biggest. Because they rely on outdated processes, traditional lenders can take days to issue a mortgage pre-approval. With Better Mortgage, online pre-approval lets you get started right away and kick-off your homebuying or refinance in as little as 3 minutes. Use your laptop or your mobile device to upload financial documents and keep everything organized in a streamlined dashboard.
Working with a digital lender means you can log in and upload your documents anytime, anywhere. At Better Mortgage, we use bank-level security to process pre-approvals, so your data is always kept safe and secure. After you submit your initial documentation, our online tools will instantly match you with great mortgage options. From there you can use your pre-approval letter to start shopping for homes in your price range.
Read Also: How Does Reverse Mortgage Work After Death
Two Smart Homebuying Moves: Mortgage Prequalification And Preapproval
Find out how much house you can borrow before you start looking and how you can make the strongest offer possible on the property you choose.
If youre ready to make your dream of owning a home a reality, youve probably already heard that you should consider getting prequalified or preapproved for a mortgage. Its time to understand exactly what each of those terms means and how they might help you. And when youre working toward a goal this big, you want every advantage.
Ready to prequalify or apply? Get started
Is There Anything Better Than A Mortgage Pre
With this competitive housing market, mortgage pre-approval letters have unfortunately started losing their authority. Most buyers have them, and in a multiple-offer situation, they just dont have what it takes to make you stand out.
Fortunately for you, theres something better!
If you want a true competitive advantage, Churchill Mortgages Certified Homebuyer program is a great option. When you become a certified homebuyer, you have all the advantages of a pre-approval like credibility as a homebuyer, confidence in your search, and an accelerated closing process.
But unlike with pre-approved mortgages that only involve a loan officer, your certified homebuyer application is reviewed by a mortgage underwriterwhich is a huge advantage when you start shopping for houses! Youll be able to close faster and have a leg up on other buyers who will probably have to wait for an underwriter to review their application.
Dont sell yourself short with a standard pre-approval. Take your home-buying credentials to the next level today and get in touch with a Churchill Mortgage expert!
About the author
Ramsey Solutions
Also Check: When Is Best To Refinance Mortgage
Learn More About The Benefits Of Prequalification And Preapproval
As you look for a home, you may be asked to get prequalified or preapproved. Before you start, its important to understand the difference.
When you want to talk to a lender to establish a general range of home prices, you can get prequalified, which is simply a lenders estimate of what you could potentially borrow.
This can be completed easily and conveniently online, in person, or over the phone in just a few minutes with basic information like your income and expected down payment.
When you want to give yourself a competitive edge over other buyers in the market, you can get preapproved. Having a preapproval lets sellers know that you already qualify for the home financing which greatly increases your chance of having your offer selected.
Unlike prequalification, preapproval is a more specific estimate of what you could borrow from your lender and requires documents such as your W2, recent pay stubs, bank statements and tax returns.
The lender will then use these documents to determine exactly how much you can be preapproved to borrow.
Once youre preapproved, youll have 90 days to find a home you love. Then you can lock your rate and complete your application.
Whether you choose to get prequalified or preapproved, you will have a better sense of whats in your price range and can hunt for a house with confidence.
How Long Does Mortgage Pre
The wait for an answer depends on the lender. Some lenders advertise same-day approval, while others may take a few days or a week. Keep in mind that the terms pre-qualified and pre-approved may have different meanings among lenders and may be used largely interchangeably, so how long they take can also vary. Its important to make sure what the lender is actually doing: pre-qualification, or the deeper pre-approval.
Don’t Miss: What Happens To My Mortgage If I Die
Why Apply For A Mortgage Pre
A mortgage pre-approval is an important part of the home buying process. If you are pre-approved, it means that a lender has stated that you qualify for a mortgage loan based on the information you have provided, and subject to certain conditions. A mortgage pre-approval often specifies a term, interest rate and principal amount. Although not a required step, it is helpful as it can give you a clearer picture of how much house you may be able to afford.
Youre Our First Priorityevery Time
We believe everyone should be able to make financial decisions with confidence. And while our site doesnt feature every company or financial product available on the market, were proud that the guidance we offer, the information we provide and the tools we create are objective, independent, straightforward and free.
So how do we make money? Our partners compensate us. This may influence which products we review and write about , but it in no way affects our recommendations or advice, which are grounded in thousands of hours of research. Our partners cannot pay us to guarantee favorable reviews of their products or services.Here is a list of our partners.
You May Like: What Happens When You Prequalify For A Mortgage
What Is Mortgage Preapproval
Preapproval is as close as you can get to confirming your creditworthiness without having a purchase contract in place. You will complete a mortgage application and the lender will verify the information you provide. Theyll also perform a credit check. If youre preapproved, youll receive a preapproval letter, which is an offer to lend you a specific amount, good for 90 days.
It Makes You A More Attractive Buyer
There are two types of markets: buyers markets and sellers markets. In a buyers market, inventory is high and demand is low and you have a lot more lee-way in terms of the purchasing process. In a sellers market, however, inventory is low and demand is high, and buyers need any advantage they can get on their side if they want to eke out the competition.
Most markets go back and forth between these two varieties season to season and/or year to year. And if youre looking to buy in a sellers market, then one of the advantages that youre definitely going to want is a mortgage pre-approval.
Consider this: if there are two buyers making an asking price offer on a home and only one has a mortgage pre-approval, who do you think the seller is going to be more likely to go with? In almost all cases its going to be the buyer with a pre-approval, since theres a lot less risk to the seller of the deal falling through due to lack of appropriate financing.
Recommended Reading: How Much To Pay Mortgage Off Early
The Buyer Lost Income Or Piled On Debt
A home buyers ability to repay its mortgage gets based on Debt-to-Income. DTI is the amount of debt a buyer has compared to their income.
Mortgage approvals cap a buyers debt-to-income ratio near 50 percent.
If the buyers debt rises but their income stays the same, the pre-approval may get revoked at the point of purchase.
Is Mortgage Preapproval Worth It
Mortgage preapproval comes with several benefits. First, it gives you an idea of how much you can borrow, which will help narrow down your search to houses in your price range. But remember that just because youve been preapproved for an amount doesnt mean you have to borrow the maximum. In many cases, its probably a good idea that you dont. Thats because many mortgage lenders use your gross monthly income as a factor in determining how much you qualify for.
Your lender generally doesnt consider your daily living expenses things like groceries, utilities, childcare, healthcare or entertainment or monthly debts in its calculations. Its up to you to review your budget to make sure youre comfortable with the loan amount. Dont rely on your lender to tell you what you can afford.
The preapproval process could also uncover potential issues that would prevent you from getting a mortgage, so you can work them out before setting your heart on a house.
Lastly, a mortgage preapproval lets sellers know you have the borrowing power to back up an offer you make to buy their home, which could make your offer more competitive. It tells real estate agents, who typically work on commission, that spending time on you could well pay off with a transaction. And it alerts lenders that youre a savvy borrower who may soon be taking out a mortgage loan.
In short, getting preapproved for a mortgage signals that youre a serious buyer.
Also Check: Can You Do A Reverse Mortgage While In Chapter 13
