GETTING PRE-APPROVED FOR YOUR MORTGAGE

Step two in the process of buying a home is to getting pre-approved by a mortgage lender. As REALTORS®, we want our clients to be prepared when they find the perfect home, so we don’t present offers on homes for our clients unless he or she has been pre-approved. We’d hate for you to find the home of your dreams and miss out because of a financing issue. Often in fast-moving markets like ours, agents and sellers require pre-approval letters along with offers to purchase property. It’s important that you have an understanding of how much you can comfortably afford to spend, what your monthly payments will be, what interest rate you qualify for, and how much you’ll be paying each month in taxes and homeowners association fees.

Having a good mortgage lender is a crucial part of ensuring a smooth transaction.  Working with a bad mortgage lender can make the process incredibly complicated for everyone involved (especially you) and put your purchase in jeopardy of not closing on time or at all.  You also might end up regretting the lender you chose if you end up having to move your closing date, or if you’re selling too, cause a scheduling chain reaction because of a delay. You could also lose out on your dream property because your mortgage lender was disorganized and couldn’t get you fully approved during underwriting, costing you time and money.  That’s why it’s important to work with the best.

 

 

 

 

PAPERWORK YOU NEED TO GATHER

Each lender has slightly different requirements regarding what documentation they need from you for the pre-approval process. In general, begin gathering the following items:

  • Complete a mortgage application. Lenders will provide this to you directly via an online link.

  • Applicant’s two most recent monthly statements for any asset account or information listed on the application.  i.e. checking, savings, 401k, mutual funds, individual stock accounts, IRA’s, investment accounts

  • Applicant’s two most recent paystubs

  • Past two years W2s

  • Past two years US Federal Tax Returns

  • For self-employed applicants (if you own more than 25% of the company), Corporate Tax Returns for two years

GETTING A PRE-APPROVAL LETTER 

Typically, once you submit the above items to your lender you should receive a pre-approval letter in a couple of business days.  Your lender may ask for additional documentation, but they are not trying to be difficult by asking for additional documentation. In addition to your pre-approval letter, which shows the amount you can afford to purchase, ask your lender to show you what your pre-approval amount breaks down into monthly mortgage payment plus any PMI, taxes, and insurance.

LOAN ESTIMATE AND UNDERSTAND YOUR CLOSING COSTS

Mortgage lenders will provide you with a Loan Estimate (LE) once you’ve settled on a property and made an offer. The LE provides an estimate of the closing costs you’ll need on top of your down payment and shows exactly what fees the lender is charging you.  Please call us or your lender if you need any explanation of these fees. Generally, closing costs are roughly 2.5-3% of the purchase price of the property. Your lender can provide you with detailed estimates based on your exact pre-approval price. Closing costs are due at closing (except for the appraisal and inspection fees, in most cases these are paid by you on the day those services occur) and are on top of your down payment. Let’s break it down; if you’re buying a $500,000 property and putting down 10% towards the loan you’ll need to have $62,500 cash available at closing ($50,000 for your down payment and roughly $12,500 for the closing costs).

 

 


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