Why Get Pre-Qualified?
1. Pre-qualification acts as a dry run of the loan application process. This is short and painless if you are working with one of my preferred lenders. They get basic information from you to pull your credit report and they may get initial documents from you to determine your income and how you are paid. Most have a convenient online loan application that takes just a few minutes to complete. The entire process is seamless and automated. So you don't need all your account balances to complete the application as this will pull through on the credit report. This will require some time on the phone. The whole process should take no more than an hour or two total to get going. It is never too early to get with an awesome local lender, no cost or obligation to use them, though they will work to earn your business.
2. While a "pre-qual" is non-binding to the lender (because the information you provide has not been verified), it does serve as a good indication to potential sellers of your general creditworthiness. It is required with any offer to purchase a home. It is imperative to know an sales amount and a total payment amount for which you qualify.
3. A few documents you can gather to assure your lender has all the information they need to thoroughly review your loan file: Your most recent 30 days paystubs (if self-employed, mention that now), copy of your driver license, most recent 2 months bank statements, all pages, most recent W-2 and 1099. Don't worry with information on your debts as this will populate the application after the lender runs your credit report.
4. Lender will run your application through their automated underwriting system which will make a recommendation for approval or denial to include conditions for the loan to be approved. This is not in place of traditional underwriting as that comes later in the process once you find a home.
5. Pre-approval - Some lenders can send your loan through underwriting BEFORE we find you a home and this is a true Pre-approval. The underwriter has reviewed initial documents and made a recommendation for approval. This type of pre-approval is helpful for the marginal or first time home buyer, or possibly self employed buyer who is uncertain that their loan will be approved.
With years in the mortgage business, Amy knows first hand how the loan process works and is able to educate buyers as the loan proceeds through underwriting and to closing. For many buyers, the mortgage is the hardest part, but it doesn't have to be.
The Lending Process
Once we find the home you love and want to submit a purchase offer, we will re-connect with your lender for an updated pre-qualification or pre-approval letter. What happens after we get your offer accepted and it becomes a Contract?
Your awesome REALTOR will facilitate getting your contract to the lender and title company agreed upon in the contract. REALTOR will connect all parties. From there you will update your documents for the lender making sure they have all of the following: most recent two months bank statements, most recent 30 days paystubs, most recent year's W-2 and 1099 statements, copy of driver license, evidence to document any special circumstances including prior bankruptcy, divorce, ownership in a business, real estate owned, debts not shown on your credit report. It is important that you provide clean copies of documents, including all pages even if pages are blank.
The loan process typically takes 30 days. It can take less if the lender has all of your documents and you are providing answers and additional documentation to the lender as needed. It can take longer if you do something silly like open new credit, change jobs, trade in your car or something of that nature. Any change in your credit profile must be documented and credit report updated to reflect the truest debt obligation; this all takes time. Don't do any of this.
Communication is key to a successful closing. Always answer your lender's calls and emails. If you have certain hours in which you are able to communicate, let your lending team know this. Save your lender's number(s) as contacts in your phone, and include loan officer assistant and processor.
What are the up-front costs to buy a home?
At the time of contract, expect to pay 1% of the sales price in Earnest Money (down payment) and $100-$250 in Option Money. The Option Money buys you the unrestricted right to terminate the contract within the option period, usually 5-7 days and agreed upon in the contract. The Earnest Money is held by the title company and is credited to your down payment or closing costs at closing.
Once you are under contract, you will order a home inspection. The cost for this varies by property and generally runs around $450 for properties smaller than 3,000 sf without a septic system. While the inspector must be your choice, we can make a few recommendations for you to choose.
Last, the appraisal payment is due at the time the appraisal is ordered by the lender. You will make your payment directly to the lender, and the cost is usually $450. The appraisal report takes 7-10 days to receive. You will not know who the appraiser is or when they will go and inspect the property; the appraiser is randomly assigned by a third party appraisal management company hired by the lender.
Your first mortgage payment will be due the second month after you close. Close in October, and your first mortgage payment is due December 1.