What You Need to Get Pre-Approved for a Mortgage



What is the mortgage pre-approval process? Applying for a mortgage may be exhilarating, nerve-wracking, and perplexing all at the same time. Some internet lenders can pre-approve you in as little as a few hours, while others may take several days. The length of time it takes is determined by the lender and the complexity of your financial situation.

To begin with, you’ll need to fill out a mortgage application. You’ll give the lender your name and address, as well as your Social Security number, so that they may check your credit. Although mortgage credit checks are considered hard inquiries on your credit reports and may have an impact on your credit score, if you’re shopping for various lenders in a short period of time (typically 45 days for current FICO scoring models), the combined credit checks are treated as a single inquiry.

A sample of a standard mortgage application can be found here. Both applicants must submit financial and work details if you’re applying with a spouse or other co-borrower whose income is required to qualify for the mortgage. A mortgage application is divided into eight stages.

1. The type of mortgage and the loan’s terms

The loan product you’re applying for; the loan amount; terms, such as the length of time you’ll have to pay back the loan (amortization); and the interest rate.

2. Property Specifics and Loan Purpose

The address; the property’s legal description; the year it was built; if the loan is for a buy, refinance, or new construction; and whether the loan is for primary, secondary, or investment purposes.

3. Information About the Borrower

Your full name, date of birth, Social Security number, years of school attended, marital status, number of dependents, and address history are all pieces of information that can be used to identify you.

Workplace Information present

and prior employers’ names and contact information (if you’ve been at your current job for less than two years), dates of employment, title, and monthly income.

5. Information on monthly income and total housing costs

You can see how much money you make each month, as well as how much money you make each week. You can see how much money you make each week by looking at your pay stub.

You’ll also need to keep track of all of your monthly housing costs, such as rent or mortgage payments, homeowners’ or mortgage insurance, property taxes, and homeowners’ association dues.

Liabilities and assets

A list of all checking and savings accounts at banks and credit unions, as well as life insurance, equities, bonds, retirement savings, and mutual fund accounts, with current balances and prices. Bank and investment account statements are required to demonstrate that you have sufficient funds for the down payment and closing charges, as well as cash reserves.

This includes revolving charge accounts, child support payments and loans for cars and other things. You also need to list any debts that you already have.

7. Transactional Information: a

summary of crucial transaction facts, such as the purchase price, loan amount, value of improvements/repairs, projected closing expenses, buyer-paid discounts, and mortgage insurance (if applicable). Much of this information will be filled in by the lender.

8. Statements: Any

judgments, liens, previous bankruptcies or foreclosures, pending lawsuits, or outstanding debts are listed. You’ll also be asked if you’re a U.S. citizen or permanent resident and if you want to live in the house as your principal residence.

Most house sellers will be more willing to negotiate with buyers who can show that they can afford to buy the house.

What Happens After That?

Loan estimates are three-page documents that lenders must give you within three business days of getting your mortgage application. They are called “loan estimates.”

This paperwork outlines the loan amount, terms and type of mortgage, interest rate, estimated interest and payments, estimated closing costs (including any lender fees), an estimate of property taxes and homeowner’s insurance, and any special loan features, as well as whether the mortgage has been pre-approved (such as balloon payments or an early prepayment penalty). It also defines a maximum loan amount based on your financial situation, which might help you stick to a tighter budget when purchasing a property.

If you’ve been pre-approved for a mortgage, your loan file will be transferred to a loan underwriter, who will compare your documents to the information on your mortgage application. The underwriter will also check to see if you meet the borrower requirements for the loan program you’re applying for.

Documentation is required.

You’ll need to acquire a number of documents to verify your information after you’ve submitted your mortgage application. On your part, preparation and organization will make the process go more smoothly. Here’s a list of the paperwork you’ll need to be pre-approved or get final loan approval before closing:

Bank statements for the previous 60 days

Pay stubs for the previous 30 days

Returns from the prior two years’ W-2 forms are tax forms.

Self-employed borrowers should use Schedule K-1 (Form 1065).

Returns on income

Account statements for assets (retirement savings, stocks, bonds, mutual funds, etc.)

A driver’s license or a passport issued by the United States

Divorce documents (to use alimony or child support as qualifying income)

If you are funding your down payment with a financial gift from a relative, write a letter of gratitude.

Gifts for the Down Payment

Many loan programs allow borrowers to put a relative’s financial gift toward the down payment. If you take this path, a lender will require you to fill out a standard gift letter in which you and the gift donor certify that the gift is not a third-party loan with a payback obligation.

Otherwise, such a deal could raise your DTI ratio, lowering your chances of getting a loan. In order to source the transfer of cash funds from one account to another, both you and the donor will need to furnish bank statements.