November 11, 2013

Mortgage Pre-Approval: Lock Before You Look

As a mortgage lender, I am continually shocked at the amount of buyers who look for homes before they have done their homework regarding mortgage pre-approval. I personally have seen dozens of home purchases fall apart because a loan officer did not thoroughly review a borrower’s financial and credit documents or the borrower was in too much of a hurry to purchase a new home that they never even took that step. I have heard the same line over and over: “I have great credit; I make plenty of income to afford this home; I am not worried about pre-approval; if a bank won’t give me a loan, then they won’t give anyone a loan.”

Ask yourself this one question: if you cannot get a mortgage loan for the new property you are buying, can you (and will you) pay cash for the home? If the answer is NO, as it is with the overwhelming majority of new home buyers, then take your time when obtaining your mortgage pre-approval and make sure it is thorough.

If a lender is issuing a full and complete pre-approval, you should be asked to provide the following documents:

  • Last two pay stubs
  • W2s for the last two years for all jobs
  • Federal tax returns for the last two years
  • Bank and investment statements to document down payment funds and reserves
  • Additional credit documents if necessary such as a divorce decree or bankruptcy papers

Mortgage lending is not easy and it should not be easy. Remember, that these lenders are providing you a loan for hundreds of thousands of dollars. Everyone knows what happens when banks give loans to borrowers who cannot afford them.

But, there are also many false reports in the media that it is near impossible for first time buyers to get approved or that you need 20% down. With good credit, stable income and at least 5% for a down payment, most home buyers will be approved if you prepare accordingly. So do your homework before you look for a home. Lock up a mortgage pre-approval before you begin your search, even if it is just on line home search.

For a free mortgage pre-approval, contact us below or at 708-531-8388.

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