What Is The Pre Approval Timeline
Pre Approval Timeline Explained
Home Buyers most common questions asked is what is the pre approval timeline. Once a person decided to buy a home, their next step is to consult with a mortgage loan officer to get qualified and see how much home they can afford. In order to visit homes, almost all listing real estate agents will require a pre approval letter issued by a mortgage loan originator. A pre qualification letter and pre approval letter are totally different. A pre qualification is when you consult with the mortgage loan officer and he or she will interview you without you sending any documents or running credit and tells you that you are pre qualified. The mortgage loan officer will base his or her decision on whether or not that you are pre qualified from what you tell him. Here is a typical pre qualification interview:
- Are you self employed or a W-2 wage earner? Are you hourly or salaried? If hourly, how many hours a week do you work per week and how long have you been at your current job? Do you have overtime income, bonus income, part time income and if so, have you been receiving those other income for at least two years?
- How is your credit? How many credit tradelines do you have and how is your payment history? Have you been timely on all of your payments in the past 12 months? Do you know what your credit scores are? Do you have any collection accounts with outstanding balances? Have you had a bankruptcy and if so when was the bankruptcy discharged date? Have you had a prior foreclosure, deed in lieu of foreclosure, short sale in the past and if so when was the sheriff’s sale or recorded date of the foreclosures and with a short sale, when was the property sold? Do you have any student loans and are they current? Do you have an auto loan or auto loans and if so approximately how much is it every month? Do you have any judgments and/or tax liens? Are you obligated to pay any child support and/or alimony payments and if so, how much and how long are you obligated to pay.
- Are you currently renting or living with friends or family rent free? If you are renting are you renting from an individual or property management company? If renting from an individual, how are you making your monthly rental payments? Check? Online? Cashier’s Check? Cash?
- How much is the approximate property taxes and insurance on the properties you are looking at?
Pre Approval Timeline: What Does A Pre Approval Entail
The pre approval stage is the most important stage in the mortgage process . The main reason for last minute mortgage denials is due to the mortgage loan officer not being diligent on qualifying the mortgage borrower and issuing a pre approval letter without full due diligence. Some mortgage loan originators may issue a pre approval letter with just taking a mortgage loan application ( 1003 mortgage loan application ) and running credit and as long as the borrower has the minimum credit scores required, they will issue a pre approval letter. The borrower then takes the pre approval letter and enters into a real estate purchase contract. The mortgage loan originator then processes the mortgage loan application and the mortgage processor finds all types of errors and kicks back the mortgage loan application. This will cause delays. However, there are some mortgage loan processors who may just assume that the borrower is fully qualified and not second guess the loan officer and submit the mortgage file to underwriting where the file gets fully underwritten and the underwriter issues a mortgage loan denial . The number one reason for mortgage loan denials is due to sloppy pre approval letters issued by mortgage loan originators. If you are a home buyer and get a pre approval letter by a loan officer without the loan officer asking you for at least two years tax returns, two years W-2s, and 30 days paycheck stubs, then find yourself another mortgage loan officer because the loan officer did not properly pre approve you and you stand a chance of a last minute mortgage loan denial.
How Solid Is Your Pre Approval Letter?
If your pre approval letter is solid, there should be no stress during mortgage process and your mortgage loan should not just close but close on time. Pre Approval Timeline depends on when you can get your mortgage loan officer at least three forms.
- Two years tax returns: The loan officer needs to look at your income tax returns for the past two years and see all the tax write offs that you have declared; unreimbursed expenses. The adjusted gross income is used and all write offs you have is deducted from your income. The adjusted gross income is used as qualifying income.
- Two years W-2s.
- 30 days paycheck stubs.
Besides your income, the mortgage loan originator needs to carefully review your credit scores. Just because you meet the minimum credit scores is not enough. The loan officer needs to make sure that you have no credit disputes on non-medical collection accounts with outstanding credit balances and you cannot have any credit disputes on charge off accounts. A big issue with retracting credit disputes is that your credit scores will drop once your credit disputes has been retracted.
Mortgage loan originators need to make sure that you have had timely payments for the past 12 months. You can qualify for FHA Loans with outstanding collection accounts and prior bad credit and you do not have to pay off outstanding unpaid collection accounts to qualify for a FHA Loan. However, most mortgage lenders want to see on time payment history in the past 12 months. One or two late payments are not deal killers but a mortgage loan officer needs to review your recent payment history and if there are questionable items and/or issues, the loan officer needs to present the issue with a mortgage underwriter or a mortgage underwriting manager before issuing a pre approval letter.
If you need a solid pre approval from a mortgage lender with no lender overlays on either FHA Loans or Conventional Loans, please contact me at 262-716-8151 or email me at email@example.com. My team of licensed loan officers and myself are available 7 days a week, evenings, weekends, and holidays to take your phone calls and answer all of your mortgage questions.