In a Highly Competitive Housing Market, You need to get Pre-Approved for a Home Loan Before Making an Offer

Getting pre-approved for a home loan is one of the most important things to do before you start searching for a house or condo.  While you have probably spent a great deal of time imagining our dream home; you probably have not researched the differences between being pre-qualified verse being pre-approved for financing.

A home loan is really one of the critical pieces of the home buying process.  

Get it done first.  It will end up saving you hours of time searching for a home online.  You will know how much you can afford to purchase and what your monthly payments will be before making an offer to buy.

Lending has changed in the past few years.  Wow…unbelievable changes.  So, taking this step is the best financial move you could make.

Should You Be Pre-Qualified or Pre-Approved?

• Pre-Qualification letters are given as informal and tentative approvals for buyers; however, they would NOT have verified the accuracy of your information.

   

• Pre-Approval letters are formal agreements and offer buyers’ a guarantee of loan approval for a specific amount. The financial institution issuing such a letter may or may not charge for this service.

• They will verify credit history, employment status, assets and liabilities to help determine the amount of credit they are able to offer. If you are a serious buyer, this is the suggested “pre” letter to obtain FIRST before you view homes for sale.

Frequently Asked Questions about being Pre-Approved

1. How long does it take to get preapproved for a mortgage loan?  It should take 24-48 hours once you have all the documentation to the lender.
2. How long does a pre-approval for a mortgage last?  For as long as your credit score lasts (120 days)
3. What documents do you need to get preapproved for a home loan?  It depends on your circumstances but usually most recent paystubs and bank statements, 2 years most recent W2s, and 2 years federal tax returns.
4. What is the minimum credit score for a mortgage?  Conventional requires 620, VA doesn’t have a minimum credit score and FHA can go as low as 500 credit with 10% down payment or 580 credit with 3.5% down.  Some lenders require 620 FICO credit score regardless of the loan program.
5. What is a down payment assistance program?  A program that provides the monies for your down payment and/or closing costs. 
6. How do you pay back a down payment assistance program?  If you’ve received a grant, you don’t have to pay back the monies.  Certain programs are at 0% interest and money doesn’t have to be paid back until you refinance, sell your home or after 30 years.
7. What are down payment programs available for first time home buyers?  CalHFA, GSFA, Daisy are some of the programs available, Your lender can provide information for other states, county, and city programs as well.  
8. What is a gift and gift letter and how does that help me get a loan?  Your down payment can be a gift from a relative, finance and in some cases a close family friend or employer.  You’ll have to produce a letter which includes the name of the donor, their relationship to you, the date and amount of the gift and a statement that says the money is given with no expectation of repayment. Your lender can explain the documentation needed
9. What is the lowest amount I can put down to purchase a home? 3% for conventional and 3.5% for FHA.  With the down payment assistance programs, you could have 0% down.
10. What price point is right for me?  A lender will determine your borrowing power after considering multiple factors such as your monthly income, employment history, credit score, and overall credit-worthiness. Only you can determine the mortgage debt that you’re willing to bear and how much you can comfortably afford to borrow.
11. How does my credit score affect my borrowing power?  Your credit score in addition to other significant factors such as employment history, debt, and monthly income, all play a role in determining your credit-worthiness to the lender.

Request a home loan checklist today via email.  Just fill out this form below as add “home loan checklist” in the Message section. 

By submitting this form with your telephone number, you are consenting for ONE lender to contact you for financing.  

Jay Valento, Your California Realtor®, Keller Williams Coastal Properties and a lender may contact you even if your name is on a Federal or State “Do not call List”.  When you have questions, call Jay at 562-413-7655.

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