Pre-Approval Versus Pre-Qualification
Most mortgage lenders are issuing a quick pre-qualification versus a mortgage pre-approval and that can be a risky move. A pre-qualification is just a question and answer session between the mortgage loan borrower and the licensed mortgage loan originator and the mortgage loan originator just goes by the word of the borrower. A pre-approval is when the mortgage loan originator reviews the completed 1003 mortgage loan application, verifies the gross monthly income of the borrower or borrowers, runs a credit check, and runs the file to Fannie Mae’s Automated Underwriting System. I strongly recommend that you go by the mortgage pre-approval versus the pre-qualification prior to signing a real estate purchase contract. Most seasoned real estate agents will require a mortgage pre-approval prior to showing homes.
Advantages Of A Mortgage Pre-Approval Letter
A mortgage pre-approval letter will be advantageous to you in many ways.
- A mortgage pre-approval will show what mortgage amount that you and your co-borrower will qualify for and what your maximum allowable housing expense will be which includes principal, interest, insurance, mortgage insurance premium, and property taxes.
- If you have a solid pre-approval letter backed by the approve/eligibile per DU Findings, it will show the seller’s team that you are a strong qualified buyer and mean business.
How Do I Get Pre-Approved For A Mortgage Loan?
If you are interested in getting a pre-approval, you can visit me at Gustan Cho Associates at www.gustancho.com and click the APPLY NOW icon on the top right of my website. It is a 4 page 1003 mortgage application and once you submit your online application, I will get alerted and go over the application with you. I will then run a mortgage tri-merger credit report and review your file. I will then submit it to Fannie Mae’s Automated Underwriting System for an automated approval. Once I get the approve/eligible, I will issue you a mortgage pre-approval and you can go shopping for your dream home. I represent dozens of wholesale mortgage lenders and a good percentage of them do not have any internal overlays. Once I get an approve/eligible per DU Findings and you can verify income, assets, and liabilities, we are almost as good as gold. You can then start shopping for your dream home and are ready to enter into a real estate purchase contract.
Mortgage documents needed
For hourly and salaried employees:
- Last 2 years W2s from employer, or employers and personal tax returns.
- 2 most recent or 30 days pay check stubs.
- 2 most recent checing and saving account Bank Statements, 401(K), Liquid Assets, Investment Accounts and all other asset accounts.
Income and asset information for self employed mortgage loan borrowers:
- Last 2 years personal and business tax returens.
- Personal financial statement.
- Year to date profit and loss statements.
Letters of explanations are required if the following apply to you:
- Gaps in employment, unemployment, or underemployment or a change to a different line of work or profession.
- If you had derogatory information such as bankruptcy, deed in lieu of foreclosure, foreclosure, short sale, judgments, tax liens, collections, charge offs, or late payments on your credit report. Overdrafts in the past year are really frowned upon by mortgage lenders but one or two overdrafts are allowed as long as it is accompanied by a good letter of explanations.
Other Applicable Documents That May Be Required If It Applies To You As A Mortgage Loan Borrower
- Bankruptcy Discharge paperwork, all pages.
- Child Support Documentation paperwork.
- Lease Agreements and contracts in the event you own rental properties.
- Verification of Mortgage in the event you own other residential or commercial properties.