After you’ve figured out what you can or are willing to afford on a monthly basis, it’s a great idea to sit down with a lender and get pre-approved for a mortgage. This will make your home search easier by narrowing your focus and will prevent you from falling in love with a home that is outside of your price range.
Choosing the right lender is important:
- a broad selection of loan products
- great rates
- low fees and closing costs
- available and easy to work with
- has a good reputation with seller’s agents
The last point is often overlooked, but will frequently make the difference between an accepted offer or a rejected offer. With price being equal or close, sellers will often look at the source of funding as a factor to determine which offer to accept. Listing agents often have a lot of painful experiences with certain lenders, who were difficult to work with – or worst case, killed a deal. Choosing the right lender can often give you a competitive advantage in a multiple offer situation.
Aside of the lender it also makes a big difference who your loan officer is: a great loan officer has in depth knowledge on a wide variety of loan options and can help you choose the best one, including attractive, but lesser known programs like USDA or WHEDA. A great loan officer also knows how to navigate all the financing obstacles like underwriting, appraisal and inspection issues to make sure you will close successfully and on time.
5 things you will typically need when applying for a loan:
- your last 2 tax returns
- your last 2 pay stubs or other from of income
- your last 2 months bank statements (verification of income, expenses and down payment – must be seasoned)
- credit history (lender will run your credit)
- photo ID
Pre-Approval Letter vs Pre-Qualification
After review of the 5 items listed above the lender can now issue an a pre-approval letter, which will become part of any offer you make to demonstrate to the seller that your confirmed ability to purchase and finance the property.
Many online lenders allow you to self-certify and print a pre-qualification letter. Because nobody has reviewed your financial situation or ability to obtain financing, it is pretty worthless in the eyes of a savvy seller.
Things NOT to do after you have your pre-approval letter:
- do NOT apply for new credit, lease a new car
- do NOT make major purchases
- do NOT pay off your debt without consulting with your loan officer
- do NOT co-sign loans
- do NOT change jobs, inform your loan officer of any changes
- do NOT fall behind on bills, protect your FICO score