Pre-Approval Letter: How Long Does Pre-Approval Take?
The Pre-Approval stage is the most important stage in the mortgage loan application and mortgage loan approval process. An experienced and diligent mortgage loan officer should carefully analyze the mortgage loan applicant’s income, credit, credit history, income, and assets before issuing a pre-approval letter. The pre-approval letter is the ticket for a home buyer to enter into a real estate purchase contract and proceed with the mortgage loan approval process and close on their home. If a mortgage loan originator issues a pre-approval letter without properly qualifying the mortgage loan applicant and the mortgage loan applicant enters into a real estate purchase contract and the mortgage application goes through processing and underwriting, the mortgage loan application can and most often be turned down and this is how most mortgage loan denials happen.
Typically, How Long Does Pre-Approval Take?
Many home buyers who made up to purchase a home needs a pre-approval letter from a mortgage loan originator. This is an exciting time for home buyers and most home buyers are antsy to get a pre-approval letter and start shopping for their dream homes. Many times home buyers get discouraged when they contact a mortgage company and the mortgage loan originator does not issue a pre-approval letter within minutes or the same day. How long does a pre-approval take? It depends on the individual mortgage loan borrower. All mortgage loan officer can issue a pre-approval letter in minutes of taking a mortgage loan application and running credit. However, there is more to that when issuing a solid pre-approval. When a mortgage loan originator looks at the mortgage loan borrower’s 1003 mortgage loan application and sees the gross income the mortgage loan applicant listed, reviews the credit report and sees that the mortgage loan borrower has credit scores over 700 FICO plus, it should be a no brainer that the mortgage loan applicant is pre-qualified and pre-approved right? Wrong. A good experienced mortgage loan officer should collect the mortgage loan applicant’s two years tax returns, two years W-2s, and most recent paycheck stubs, and if the mortgage loan borrower had a prior foreclosure or deed in lieu of foreclosure, the mortgage loan officer should research the foreclosure and deed in lieu of foreclosure prior to issuing a pre-approval letter. If I were a home buyer and counting on a mortgage loan officer to give me a pre-approval letter, I rather wait an extra day or two and make sure the pre-approval letter is solid and valid than taking a chance of getting a pre-approval letter that is not solid where my mortgage loan process can be halted because my loan officer did not properly qualify me. I am sure most mortgage loan borrowers will agree with my point.
Income When It Comes To Pre-Approval
Out of the many questions asked on a mortgage loan application is income. Income is the most important factor when it comes to qualifying for a mortgage loan. You can have perfect credit score but if you do not have qualifying income, you cannot get a mortgage loan. You can have lower credit scores and prior bad credit but as long as you qualify with income, you can get a mortgage loan. When you list your income, you need to list gross monthly income. However, your mortgage loan originator needs to see your income taxes for the past two years to determine if you have any unreimbursed expenses. Unreimbursed expenses need to be subtracted from your gross income and may affect your debt to income ratios. Overtime income, part time income, and other income needs to be analyzed as well too. If you do not have overtime income, part time income, or other income for the past two years, it cannot be used to qualify for your income. If overtime income, part time income, and other income for the past two years but has been declining , you may not be able to use it at all since it is declining income.
Two years W-2s are requested by the loan officer because he or she needs to determine the gross income, part time income, and other income on the W2s and make sure there are no deductions such as forced wage garnishments, child support payments, or other deductions that can affect gross qualified income. Most recent paycheck stubs are requested to determine year to date income and other deductions as hours worked.
With two years tax returns, two years W2s, and most recent paycheck stubs, a solid pre-approval letter can be issued.
Foreclosure And Deed In Lieu Of Foreclosure
If a mortgage loan borrower has had a prior foreclosure or deed in lieu of foreclosure, the mortgage loan originator should confirm the recorded date of foreclosure and/or recorded date of the deed in lieu of foreclosure prior to issuing a pre-approval letter. Just because you turned in the keys to your lender in a pre-foreclosure or foreclosure does not mean that the waiting period started on that date. The waiting period after foreclosure or deed in lieu of foreclosure time clock does not start until the date of the sheriff’s sale or the recorded date of foreclosure or deed in lieu of foreclosure. Many loan officers do not check into this and due to this ignorance, the loan can get denied at the last minute.
How Long Does Pre-Approval Take To Get Issued?
A mortgage loan originator can issue a pre-approval letter as soon as they get at least three items from the mortgage loan applicant: Two years tax returns, two years W-2s, and most recent paycheck stubs. Once the mortgage loan originator runs credit and reviews your mortgage application and reviews these three items, he or she can issue a solid pre-approval letter. Self employed borrowers may take longer than W2 wage earners because the mortgage loan officer needs to review the business tax returns and take all deductions into consideration to derive the actual income that can be used. If you had a foreclosure or deed in lieu of foreclosure, the mortgage loan officer needs to confirm the actual recorded date of the foreclosure or deed in lieu of foreclosure before issuing a pre-approval letter. There are many more documents that is required to process and underwrite a mortgage loan, however, with the three initial documents, a solid pre-approval can be issued.