People dream BIG. People dream about a lot of things. People dream about a better life - a great job, a happy family, a nice car, and a nice house. You've come to a point where you are physically and emotionally ready to start carrying your own weight. You go online and look at homes for sale and you found one you like. What is your next step? Get a Pre-approval!
Pre-Qualification vs Pre-Approval
Getting Pre-qualified is the first step in the mortgage process. This process can be done either online or over the phone. Depending on the information you provide including your income, assets, and your debt, the lender will give you an idea how much you may be qualified for. It is easy and will be based on the information you provided to the lender.
Now comes a more tedious process, the Pre-approval. Once a mortgage application has been filed and necessary documentation is supplied for extensive checking on your financial status and credit standing, in this process, the lender can tell you how much the mortgage amount for which you are approved.
The one clever solution to home ownership - Getting a Home Loan Pre-Approval, is also the most misunderstood. Do you have a full understanding of the things that you need to do?
Here, we give you the low down on what lenders seek for in potential buyers and what potential buyers need to do to get closer to their ultimate goal of property ownership.
From a major listing agent in the Rancho Santa Fe Area, Shannon Biszantz: "When I have a hot property I have listed and get multiple offers competing, I toss aside the offers without pre-approval letters. Offers without pre-approval letters signal that particular buyer is not serious enough to get qualified before they went house hunting. It indicates to me that he may not be as serious in the escrow process. I will always advise a seller to consider offers only with pre-qualification or pre-approval letters."
Don't let your dream house slip away because you didn't get a pre-approval letter.
Elements lenders look for in mortgage pre-approval are the same throughout the industry. You are asked to show the following:
- A minimum of 2 years employment history in the same field or job
(It is important to note that there is a little leeway with the two-year employment history such as if you were a new graduate with evidence of income you are to earn from your present employer. However, if you were transitioning from a W-2 to self-employment without a two-year track record of your burgeoning business things would take a definite halting screech in today's mortgage universe.)*
- A credit score of 620 or higher
(a score of at least 620 is a "fairly hard rule." Your credit score may not always tell the whole story, though. All credit score models are different from each other. Credit scores used for mortgages are tougher than the consumer credit FICO scores)*
- Proof of financial assets and savings record,
- Evidence of 3%-20% down payment of the home price - depending on the loan program
- An "all-in" debt-to-income ratio of 43% or lower.
* This according to Don Bleuenstein, national sales director of retail home lending with Flagstar Bank in Troy, MI.
Avoid getting denied of a loan by being aware of what needs to be done.
Be diligent with record keeping
Showing a solid ability to save displays financial discipline and importantly shows the underwriter that the monies weren't borrowed. Wisely set aside gift monies and bonuses with a record to support its origin. Documentation of money flow is the key.
Secure a 43% or less of debt-to-income ratio
Lenders look at a ratio of 43% or less of debt-to-income which should include your mortgage payment says Bleuenstein. "So if you make $10,000 a month gross [before taxes], $4,300 is what all of your debt on your credit report needs to be under,” he adds. This should be inclusive of your future house payment, monthly property taxes, and homeowners’ insurance as well as your monthly car payments, student loans, and credit card.
BE ONE STEP AHEAD
Looking for pre-approval ahead of house hunting will importantly accomplish altering you to any qualifying issues you may not know. Bleuenstein's advice is to seek pre-approval now if you're thinking of buying in the next year. This allows you time to fix anything that may cause a hitch later.
Buying a home in San Diego North County?
If you would like to meet with me to start planning your goals to buying... From Single Family Homes, Condominiums to townhomes and more, I am positive we can find the right home for you. Visit our website to view real estate listings in the area. Call me at 619-417-4655 or email Shannon@ShannonBiszantz.com.