Pre-Approval Timeline For Home Buyers And Mortgage Process
This BLOG On Pre-Approval Timeline For Home Buyers And Mortgage Process Was UPDATED And PUBLISHED On April 28th, 2020
Pre-Approval Timeline Explained
Home Buyer’s most common question asked is what is the pre-approval timeline. The pre-approval timeline should never be rushed. The pre-approval stage of the mortgage process is the most important part of the mortgage process.
- 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 loan officer
- A pre-qualification letter and pre-approval letter are totally different
- A pre-qualification is when you consult with a loan officer
- He or she will interview you without you sending any documents or running credit and tells you that you are pre-qualified
The loan officer will base his or her decision on whether or not that you are pre-qualified from what you tell him.
Pre-Qualification Versus Pre-Approval Mortgage Process
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 that 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?
Pre-Approval Timeline Depends On Verifying Public Records
- 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, a short sale in the past
- 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
If so, how much and how long are you obligated to pay.
Verification Of Rent And Payment Shock With New Home Purchase
Verification Of Rent is very important. Lenders want to see borrowers have a history of paying rent.
Here are some questions the loan officer will ask during the pre-qualification and pre-approval process:
- 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?
- Cashier’s Check?
- How much is the approximate property taxes and insurance on the properties you are looking at?
In order to prove verification of rent, borrowers need to provide 12 months of canceled checks and/or bank statements. If the renter is renting from a professional property management company, then a VOR Form provided by the lender completed by the property manager is sufficient. Completed, signed VOR Form from property manager can be used in lieu of 12 months canceled checks and/or 12 months bank statements.
Pre-Approval Timeline And What Does 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 loan officer not being diligent on qualifying borrowers
- Issuing a pre-approval letter without full due diligence is the main reason for last-minute mortgage denials and stress during the mortgage process
- Some mortgage loan originators may issue a pre-approval letter with just taking a mortgage loan application ( 1003 mortgage loan application ) and running credit
- 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 loan originator then processes the mortgage loan application
- The mortgage processor finds all types of errors and kicks back the mortgage loan application
This will cause delays.
Delays In The Mortgage Process And Loan Closing
However, there are some mortgage loan processors who may just assume that the borrower is fully qualified and not second guess the loan officer
- They will submit the mortgage file to underwriting where the file gets fully underwritten
- The underwriter issues a mortgage loan denial
- The number one reason for mortgage loan denials is due to sloppy pre-approval letters issued by loan originators
If you are a home buyer and get a pre-approval letter by a loan officer without the loan officer asks you for documents such as the following:
- two years tax returns
- two years W-2s
- 30 days paycheck stubs
- then find yourself another mortgage loan officer
- this holds true 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 the mortgage process. A mortgage loan should not just close but close on time. Pre-Approval Timeline depends on when you can get the loan officer at least three forms.
Two years of tax returns:
- The loan officer needs to look at your income tax returns for the past two years
- see all the tax write-offs that you have declared; unreimbursed expenses
The adjusted gross income is used and all write-offs you have are deducted from your income.
Pre-Approval Timeline Dependent On Qualifying Borrowers
The adjusted gross income is used as a qualifying income:
- Two years W-2s
- 30 days paycheck stubs
- 60 days bank statements showing seasoned qualified funds to close
Besides income, the loan originator needs to carefully review borrowers’ 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
- Borrowers cannot have any credit disputes on charge off accounts
A big issue with retracting credit disputes is that credit scores will drop once credit disputes have been retracted.
Mortgage With Bad Credit
Mortgage loan originators need to make sure borrowers 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 an FHA Loan
- However, most lenders want to see on-time payment history in the past 12 months
- One or two late payments are not deal killers
- But a loan officer needs to review recent payment history
If there are questionable items and/or issues, the loan officer needs to present the issue with a mortgage underwriter or the underwriting manager before issuing a pre-approval letter.
Qualifying For Mortgage With Direct Lender With No Overlays
If you need a solid pre-approval from a lender with no overlays on either FHA Loans or Conventional Loans, please contact us at Gustan Cho Associates at 262-716-8151 or text us for a faster response. Or email us at [email protected] 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.
This BLOG On Pre-Approval Timeline For Home Buyers And Mortgage Process Was UPDATED On April 28th, 2020