Home Loan Steps
Check Your Credit
More and more, the type and amount of a loan that you can qualify for will be dictated by your Credit Scores. A few years ago, we would run a borrower’s credit report and spend some time analyzing it and even helping the borrower remove derogatory items. Based on our evaluation of a borrower’s credit, we would place their loan with a bank that we had experience with which would likely approve the borrower’s credit. Each borrower’s credit was evaluated by a human and based on explanations or derogatory items, we could work through most any problem.Today, banks require that we include a borrower’s Credit Scores on their credit report. As these scores are calculated by computers, there is very little we can do to increase a borrower’s ability to purchase if they have low scores. Most banks offer a variety of programs, rates, and fees, all based on a borrower’s scores. The lower the score, the higher the interest rate and the worse the loan terms.
Therefore, we believe that the first step you should take in obtaining a commitment from a bank for a home loan would be to have your credit report checked by a mortgage professional. We can help you with this if you Contact Us with your request.
Document Your Income and Savings
Assuming that your Credit Scores are high enough to qualify for a home mortgage, the next step would be begin documenting your income and savings. Most banks will require a two year history of employment and two months history of your savings.
For your Income, a current pay stub and two years W-2s will be sufficient for most programs. However some of the special Government Programs we use will also require 3 years of your tax returns. If you have not saved this documentation, we can help you request copies from the IRS. Also, if you are self employed or receive overtime, commission or other bonus income, we may need further verification. Check with us and we can guide you through this.
As for savings, simply having the past two or three months bank statements should be sufficient. Collect copies of all your accounts including IRAs, retirement accounts, checking and savings accounts. Cash held in a jar or under your mattress will not usually qualify so deposit any and all cash into an existing account so we will be able to verify the funds after a couple of months.
In addition to documenting your income and savings, we will probably need to send a verification to your employer(s) and your banks. These verifications should reflect the same income and savings as your own documentation shows. If we need your tax returns, we will probably also ask you to sign an authorization for us to check those returns with the returns on file with the IRS. Again, these must match your own records.
Pre-Qualify with a Mortgage Professional
After we have your credit report and your income and savings documented, we can make a good judgment as to your home financing qualifications. Our Loan Officers will spend time with you preparing a Financing Package which will put you in the best buying position possible. This package will take into account your ability to make a monthly payment, the available cash you have and are willing to use, and any Government Programs for which you qualify. This can be done with you over the phone or even online-live with one of our loan officers. It may be helpful for you to use our online system as it is much more effective for you to be able to see all the numbers and programs on your computer screen as we qualify you. This can all be done at no charge or obligation to you.
This Pre-Qualification is simply an educated estimate of the maximum home loan we can approve for you. This will not be a firm commitment nor will it be a formal loan approval. Should it be clear from this estimate that we can obtain financing for you which would be sufficient to qualify for the type of home you want, in the area you want, we should actually proceed to the next step.
Apply for a Formal Loan Approval
A loan approval is different from a loan pre-qualification. The loan approval is a formal commitment to make you a loan subject only to you finding a home to purchase. If you have been pre-qualified by us, this step is quite simple. We will email you all the forms you need to sign. Simply sign them and mail them back to us. We will do all the rest and at no cost to you. You can also use our online application process if you would prefer. We do not charge for your pre-qualification and we do not charge for your loan approval process either.
Find a Property
Having your loan formally approved is, for all intent and purposes, the same as having a line of credit ready, and you will look like an all cash buyer to the seller. This is important when it comes negotiating with sellers. If you find a great home to buy and there are other buyers bidding on the same home, all other things being equal, the seller will always take the stronger buyer’s offer. If your loan is ready to go, you will be that stronger buyer.
Now that your loan is approved, you may want to contact one of “Our Agents” and have them start looking for that new home for you.
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