September 18th, 2018 9:02 AM by Jackie A. Graves, President
“pre-qualified” today when preparing to buy a home is so 80’s. Getting
pre-qualified then meant talking to a loan officer over the phone or in an
office and having a conversation about various aspects of your financial life.
The loan officer asks about your job, how long you’ve worked there and how much
money you make. The loan officer asks about your general credit history,
whether it’s excellent, good or maybe needs a little work.
about other debt? What sort of monthly payments are you obligated to pay each
month? The loan officer would then take that information, plug in current
market rates (back in 1981 the average 30 year rate hovered around 17%. No,
really) and give you an amount you can qualify for. Maybe even the loan officer
typed up a prequalification letter you could carry around.
anymore. If all you have is a prequalification letter it’s possible your real
estate agent will ask that you go back to your loan officer and get
pre-approved. The terms do sound somewhat alike but sellers, lenders and real
estate agents alike know the difference.
preapproval ups the qualification game by verifying the conversation you had
with your loan officer. Instead of a conversation over the phone, you’ll be
asked to submit a completed loan application. The key word here is “complete.”
Well, almost. You don’t have a property picked out yet so you’ll leave that
part blank. What you can expect to provide is proof of your income instead of a
conversation. This means the most recent copies of your pay check stubs. To
make sure you’ve been working for at least two years, your W2 statements for
the last two years will also be reviewed.
you’re self-employed, you may not have pay check stubs. Regardless, you’ll need
to provide your last two years of income tax returns, both personal and
addition, a year-to-date profit and loss statement should also be prepared.
This P&L doesn’t necessarily have to be completed by an accountant or
otherwise certified, you can put one together on your own if you want.
your credit history, you’ll also be asked to sign a Borrower’s Authorization
form which allows the lender to pull your credit report and credit scores.
You’ll need funds for a down payment and closing costs so copies of recent bank
statements must be at the ready.
short, you need to get your preapproval application to the point where all you
need is a property to buy along with a signed sales contract. Now, not only can
you shop in confidence, but the sellers and the seller’s real estate agent can
put you at the top of the list when considering your offer.
absolutely everyone should be shopping for a home with a solid preapproval
letter in hand. There’s no question about it.
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