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Pre-Approval

LOAN PREQUALIFICATION / LOAN PREAPPROVAL

Pre-qualifying with a lender will help you in the following ways:

1.Interest rates are usually locked in for a set period of time. You will know in advance exactly what your payments will be on offers you choose to make.
2.You won’t waste time considering homes you cannot afford.
3.You can select the best loan package without being under pressure.
4.The seller may choose to make concessions if they know that your financing is
secured, and this may make your offer more competitive.

 

HOW TO GET PREQUALIFIED

Step 1: Get a referral for a lender or mortgage broker from a friend, relative, co-worker or real estate broker.

Step 2: Provide the following information: gross monthly income and total monthly payments (car payments, minimum monthly payments on credit cards, child support payments and all payments you have to make every month).

Step 3: Get your "ratios." You or your lender can add all your debts together and compare that number to your income to arrive at your total debt-to-income ratio.

Step 4: Give your lender authorization to pull your credit report. The report should include a FICO (Fair, Isaac and Co.) score.

Step 5: Have a lender prepare a letter of prequalification for you. The letter should state that your initial financial and credit information has been reviewed and looks good, though it will also state that the letter is not a guarantee of a loan.

LOAN PREAPPROVAL

When you get preapproved, it means that your lender has not only reviewed your loan information as in the prequalification stage, but has also taken that loan through several other steps to insure loan commitment. All of the pertinent documentation to support the loan request has been collected and reviewed by the lender. This is called the credit underwriting stage, and it is critical to make sure that the borrower is credit approved. W-2’s, pay stubs and tax returns are reviewed in order to verify income. Employment is verified. Funds necessary for closing and post closing reserves are sourced using bank statements, investment statements, and retirement assets. The credit report is carefully reviewed and prior mortgage history is verified. All compensating factors are considered as the underwriter assures the lender that the documentation supports the loan request in accordance with the guidelines for the requested loan program.

 

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