Mortgage Pre-Approval Process

Whether you are a first-time homebuyer or you are a seasoned buyer, it is important to understand what is involved in the mortgage pre-approval process.

During this step, you will reach out to a loan officer and provide them with information needed to qualify you for a loan. This means that your credit report will be checked and you will need to provide permission for the lender to do that.

Documents Needed By Lender

When you meet with a lender, you will be asked to provide documentation to support your income and assests. Some of the documents are listed below

  • Copies of your most recent bank statements
  • Most recent W-2 or entire tax return if you are self-employed
  • Proof of retirement accounts or IRAs along with current balances
  • Proof of mutual funds or stocks
  • Your driver license
  • Most recent paystubs
  • Application fee; depending upon the lender

Once the lender has reviewed all of this information, he or she will make a decision about whether you will be approved for a loan and if so the amount for which you are pre-approved.

The lender may also talk to you about different loan options including VA, FHA, conventional, and jumbo loans. If you are a first-time home buyer, please check out the NIFA loan program. It allows certain buyers to purchase a home for as little as $1,000 down.

If you are pre-approved for a loan, the lender will provide you with a good faith estimate or GFE. The good faith estimate is a document that details the terms of the loan being offered to you, such as the type of the loan, the interest rate, and the closing costs.

It should be kept in mind that the pre-approval process does not mean that the lender guarantees your loan. It simply means that you are approved to obtain a loan unless something changes.

Commitment to the mortgage loan will typically come only after the lender has had the chance to appraise the house in question. This is to ensure that the price you are paying for the home is not more than the actual market value of the home. The goal of this is to protect you as well as the lender in the event that you default on the loan. In addition, the lender will also want to check the home’s title to ensure it is clear.

Finally, you should be aware that while the lender has checked your credit in order to provide you with pre-approval, it is conditional approval. This means that if your credit report or financial circumstances dramatically change between the time that you are pre-approved for the loan and the date of closing, your loan could still be denied. To avoid this problem, make certain that you do not make any large purchases prior to the closing of your home. If you wish to buy new furniture or appliances for your new home, wait until after the loan has closed.

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