Pre-Approval Mortgage Process In Home Loan Process

This BLOG On Pre-Approval Mortgage Process Was UPDATED On July 23RD, 2019

A pre-qualification letter and a pre-approval letter are different. These days, real estate agents only want solid pre-approval letters when accepting a real estate contract offer by home buyers.

• When a loan officer pre-qualifies a borrower, they merely interview mortgage applicants
• Credit is not run and documents such as tax returns, W-2s, bank statements, or 30 days paycheck stubs are not requested
• Each loan officer has their own way of pre-approving borrowers
• Pre-Approval Letters where loan officers have run credit, reviewed tax returns, W2s, bank statements, 30 days paycheck stubs, and ran it through Automated Underwriting System has weight

Online Mortgage Application Process

Mortgage Applicants can apply online and get a solid pre-approval without meeting with a loan officer. The mortgage business is now online where disclosures are emailed to borrowers and borrowers provide and upload documents through lender’s secured websites. The pre-approval mortgage process is very streamlined and easy.

• Once the mortgage loan applicant has completed the secured 1003 mortgage application online, a loan officer will get an email alert
• The loan officer will contact the mortgage applicant to see if all of the information they have stated on the online mortgage application is correct  
• A tri-merger credit will be pulled
• The loan officer will use the middle credit score as the qualifying credit score
• The mortgage loan application along with the credit report will then be submitted to Fannie Mae automated underwriting system
• Within minutes, minutes the AUS will render its decision
• An approve/eligible per Automated Underwriting System is what we want

Mortgage Approval Process

Getting The Lowest Mortgage Rates in Chicago: Use Accurate Info!

The information stated on the mortgage loan application needs to be accurate.  All information stated on mortgage application needs to be verified during the mortgage approval process.

• If income or debt obligations are incorrect, there will be delays in the mortgage process
• Pre-approval letters are based on income, credit scores, and credit report

Mortgage Rates Versus Credit Scores

With the combination of the information mortgage applicants state on their mortgage application and the credit scores, loan officers can determine mortgage rates.

Mortgage Rates are determined by the following:

• Credit Scores
• Loan To Value
• Type Of Property
• Loan Size

Type Of Loan Program

There are various types of loan programs.

• FHA Loans
• VA Loans
• USDA Loans
• Conventional Loans
• Non-QM Loans and Bank Statement Loans For Self-Employed Borrowers

A pre-approval letter will let you know the amount of mortgage loan amount borrowers qualify for.

• It will state the estimated total housing payment which includes principal, interest, taxes, insurance, and mortgage insurance premium
• A pre-approval letter, not a pre-qualification letter, is normally required by real estate agents in order for buyers to be submitting offers on a property

How Long Is The Pre-Approval Process

The following documents should be collected prior to the issuance of pre-approval letters:

• Two Years Tax Returns
• Two Years W2s
• 30 Days Paycheck Stubs
• Verification of down payment such as bank statements

There are other documents that are required to process a loan. However, the top four docs are sufficient for a loan officer to issue a pre-approval letter. It is a good idea to start preparing the necessary documents that the mortgage lender will eventually require.

What About Online Mortgage Applications?

If there is confusion on your online mortgage application, your mortgage broker might require to supply certain documents such as tax returns or W2s.

• For example, borrowers who are concerned whether their part-time income
• Or self-employed borrowers who are concerned on what underwriters will count as qualified income may take longer to get pre-approved
• Any uncertainty with income needs to be looked at by underwriters before a pre-approval letter is issued

Documents Required To Process Home Loan

• Documents that will eventually be needed are the last 2-years tax returns, 2 years W2s, 2 most recent paycheck stubs, and 2 most recent bank statements. 
• Asset accounts like 401k, stock and bond statements, and other investment account statements will also be required.
• For self-employed borrowers, we require 2 years personal tax returns, 2 years business tax returns, and the last quarterly profit and loss statements.
• Letters of explanations might be required on borrowers who had gaps in employment histories or a change of a line of work.
• Examples are changing careers from being a school teacher to a truck driver or vice versa in the past two years.
• Other financial documents that will be needed are bankruptcy discharge paperwork if borrower filed bankruptcy, divorce decree if borrower filed for divorce, child support documents if the borrower were ordered to pay child support, lease agreements if the borrower receives rental income, and mortgage statements if borrowers own other properties.

Applying for a mortgage loan and the Pre-Approval Mortgage Process does not have to be stressful.  Home borrowers with any questions on the Pre-Approval Mortgage Process can always call us at 1-800-900-8569 or text us for faster response. Or email us at gcho@gustancho.com.