Am I Really Preapproved To Buy A Home?
Today, many lenders are not offering the pre-approval application but pre-qualification option only. A pre-qualification involves a mortgage loan officer running a credit report and looking at your pay stubs and W2 forms and making a determination of whether you should qualify for a program. Caution: This is not a preapproval. A preapproval involves submitting a full application, supplying all documents requested by the lender, and submitting the loan to underwriting for a PREAPPROVAL. After you are preapproved you will receive a COMMITMENT APPROVAL LETTER not a generic prequalification letter which means nothing. The preapproval loan process requires a borrower to give the loan officer ALL THE REQUIRED DOCUMENTATION and you must be mentally prepared to do whatever it takes to supply all the information requested by the lender. Here is a list of documents and explanation of what is required:
- Pay Stubs-30 days of consecutive pay stubs. Also, pay stubs should show year-to-date income and consistent earnings or you will need to explain your pay structure and more income verifications may be necessary.
- Last 2 years employment history-This means employer names, addresses, phone numbers to verify employment, position(s) held, and dates of employment. If there were employment gaps then they must be explained in a letter.
- Last 2 years tax returns with W2/1099 forms/returns-Income should be stable or increasing the last 2 years and bonus/overtime/commission income will be averaged over the last 2 years. If you don’t have a 2 year history of bonus/overtime/commission income then you will probably not be able to use the income at all. If your earnings are variable such as self-employment income then it is critical for you to submit a full preapproval application to determine your qualifying income.
- Last 2 months bank statements-Every page of bank statement is required (no ifs, ands, or buts) even if it is blank and all large deposits must be explained and verified. If you are depositing cash in your bank account then you better prepared to explain the source of these funds.
- Gift Funds-don’t dump gift money into account without consulting a mortgage loan professional. You will need a letter from the lender, a copy of cashier’s or certified check from donor, a deposit slip, and a lender will verify that the donor had the ability to give you the gift.
- Upfront Money-You will need money for an appraisal and credit report which can range from $350-$500, earnest money or good faith deposit on home which is typically a $1,000, and a home inspection fee which is approximately $200. The down payment(if applicable) and closing costs are due at time of closing and the seller may pay for all or most of the closing costs.
- Copy of Social Security Card and Driver’s License or State ID to verify identity.
- Debts/Liabilities-You must disclose all debts on your application. Don't forget to include child support payment if applicable. All installment loans with 10 or fewer payments may not be included in the qualifying ratios. Also, student loans which are deferred for 12 months or more may not be counted against you if you do an FHA loan. Try not to make a major purchase such as a car prior to buying a home because the ratios will be higher and you may not get approved for the first time home buyer program.
- Credit-get a copy of your credit report with 3 scores and review the report for accuracy and derogatory items. You will need to explain slow pays, collections, judgements, etc. as well as any credit inquiries. Also, your credit will be run again prior to closing to verify score so it is important not to be running up your credit cards and applying for new credit.
- Landlord name and phone number to verify your rent history.
If you are serious about buying a home then you must get pre-approved first. The process will require a lot of paperwork and information from you but the payoff will include a letter which states that you are a bonafide pre-approved buyer. The preapproval process will make the purchase of your first home a less stressful and more hasslefree experience. If you don't want to get preapproved before shopping for a home then you are rolling the dice and spending a lot of time and money without knowing if you will get approved for the first time home buyer program. Get Preapproved Today.