Getting pre‑approved for a mortgage is a great way to show sellers that you’re a serious and credible buyer.
Answer a few questions on the MoneyMax Mortgage Pre-Approval Form (which takes less than 10 minutes) and you’ll be on the road to getting pre-approved. Once approved, submit your pre-approval letter with your offer, and it may be the key to closing on your new home.
Pre-qualification Vs. Pre-approval
A mortgage pre-qualification can be useful in helping determine exactly how much you can afford to spend on your home. Pre-approval is different and far more valuable. Pre-approval means that a lender has actually checked your personal credit history and verified your documentation to approve a specific loan dollar amount (usually for a particular time period such as 90 days). Final loan approval occurs when you have an appraisal completed on the property you wish to purchase and the seller-and-buyer are prepared to close the deal.
Does Pre-Approval Guarantee a Loan?
No. Even if you receive a pre-approval letter from a lender there is a possibility that additional income and asset verification documentation may be required or contract purchase conditions amended before extending you a loan.
Pre-approval letters are subject to modification or cancellation if your financial situation or other conditions change.
Does Pre-Approval Guarantee a Loan?
No. Even if you receive a pre-approval letter from a lender there is a possibility that additional income and asset verification documentation may be required or contract purchase conditions amended before extending you a loan.
Pre-approval letters are subject to modification or cancellation if your financial situation or other conditions change.
The Step-by-Step Process…
1.
Proof of Income
“No verification” or “no documentation” loans are a thing of the past, so all borrowers need to be prepared with:
- W-2 statements from the past two years
- Last two months checking and saving account statements
- At least four of your most recent pay stubs that show income as well as year-to-date income
- Proof of any additional income such as alimony or bonuses
- If you’re self-employed provide two year’s tax returns and year-to-date (YTD) business profit and loss
- Rental Property Owners: Last two most recent years of tax returns
2.
Proof of Assets
You will need to present bank statements and investment account statements to prove that you have funds for the down payment and closing costs, as well as cash reserves. An FHA loan requires a down payment of as low as 3.5% of the cost of the home, while conventional home loans require 10% to 20%, depending on the loan program. If you receive money from a friend or relative to assist with the down payment, you will need a gift letter to prove that this is not a loan.
3.
Good Credit
Most lenders today reserve the lowest interest rates for customers with a credit score of 740 or above. Below that, borrowers may have to pay a little more in interest or pay additional discount points to lower the rate. FHA loan guidelines have tightened in recent months, too, so that borrowers with a credit score below 580 are required to make a larger down payment. Most lenders require a credit score of 620 or above in order to approve an FHA loan. Lenders will often work with borrowers with a low or moderately low credit score and suggest ways they can improve their score.
4.
Employment Verification
Your lender will not only want to see your pay stubs, but is also likely to call your employer to verify that you are still employed and to check on your salary. If you have recently changed jobs, a lender may want to contact your previous employer. Lenders today want to make sure they are loaning only to borrowers with stable employment. Self-employed borrowers will need to provide significant additional paperwork concerning their business and income.
5.
Documentation
Your lender will need to copy your driver’s license and will need your Social Security number and your signature allowing the lender to pull a credit report. Be prepared at the pre-approval session and later to provide (as quickly as possible) any additional paperwork requested by the lender. The more cooperative you are, the smoother the mortgage process will be.