You may have seen the commercials on television that promise you’ll “get approved today” I’m sorry to be the one that has to tell you this but getting approved is not one phone call or click of a mouse away.
There are multiple requirements you need before a lender will issue you a loan. Metaphorically speaking, it’s less of a jog and more of a marathon and it’s easy to get confused when reaching the finish line. The professionals at Property Records Inc in Los Angeles, California listed the four essentials steps that are often overlooked.
#1 – Getting Pre-Approved
The lending office is full of people who want to buy a house but haven’t been pre-approved for a loan. In order for you to stand out, you need to be pre-approved and ready to go.
Being pre-approved is considered a commitment from a lender to provide you with a home loan in the future of up to a certain amount. This will show lenders that you’re committed and ready to put in an offer. In most cases, sellers will only accept offers only from pre-approved buyers.
Don’t get too comfortable being pre-approved doesn’t mean you’ll get the house it only means you’ll get the loan, you still have to have the highest offer on the property.
Certain steps are required to get pre-approved; you will need a good amount of documentation. Here are some of the four things you will need:
- A minimum of two years of federal tax returns
- A minimum of two years of W-2 forms from your boss
- History of your residential history for the past two years
- Bank statements
#2 – Your Credit Score Needs to be Up-to-date
The higher your credit score the higher of a chance you will have to get the loan you want, the minimum credit score for a Federal Housing Administration or FHA is 580 and up but the ideal credit score mortgage lenders want to see is a 660 and over.
One requirement most loan programs require is that your credit score stays consistent while under contract on a house. Why is this required? Because lender’s final clearance and a loan commitment are subject to a credit-check at the last minute before closing the deal.
How to avoid jeopardizing your credit score?
- Stay on top of all your payments
- Avoid opening new lines of credit
- Don’t close old credit accounts
#3 – Take a Close Look at the Closing Disclosure Forms
Take a close look at the closing disclosure also known as a CD. Lenders are required to provide borrowers with a CD, at least three days before closing the deal. You will also be provided with the loan estimate also known as a good-faith estimate or LE. The LE is a document that shows the fees you will have to pay when you move forward to closing a deal on a home.
#4 – The Underwriting Process
Before the deal on the loan is closed, your account had to go through the underwriting process. Picture underwriters as the real estate police, they will investigate that you have provided the correct information and are not trying to do fraud or scam a mortgage lender.
Underwriters will double-check your credit score, financial statements, and other documentation that was provided. Underwriters will also contact employers to verify that the numbers are correct. This process has to be done since so many people lie on their applications.