The Mortgage Process - Getting Pre-Approved
It first starts as a hope….a dream. Maybe born out of frustration from “wasting” money on rent or maybe
it’s a hope that one day you will have a home to call your very own. Or maybe you start to think that
you really could use more space or you loathe your commute to work. Regardless of how or why, at
some point, most people entertain buying a new home. Navigating the myriad of steps and rules can be
daunting—so let’s start at the beginning.
In all likelihood you have heard the terms “pre-approval” and “pre-qualification”. They may seem
interchangeable and yet they are not. A pre-qualification is a light version of a pre-approval. The pre-qualification
is a conversation with a loan officer that is made up of generalities. There may or may not
be a credit report generated for you, income is not verified and you will not have underwriting approval.
A pre-approval is a firm offer to lend based upon supplied documentation and underwriting guidelines.
You’re likely to find, especially in a competitive market (or a “sellers” market) that a Realtor will not take
you to look at a home without pre-approval paperwork. So before you start your search, you will want to
prepare your map for this adventure.
To begin, you will have to choose a lender. There are several considerations when selecting a mortgage
company and many people prefer to choose a local lender like Bethpage for accessibility, ease, great
rates and low fees. Do your research! A reputable lender will be able to not only give you their interest
rate but will also give you an estimate of closing costs so that you are aware of the total cost to acquire
your new home and what the monthly payment could be.
At your pre-approval appointment, your lender will ask for documentation so that they can confirm your
creditworthiness and your credit will be reviewed. Remember that mortgage loans are based upon layers
of risk, and those layers of risk can affect your ability to qualify for a mortgage. You don’t want to go to
contract and find out you are not qualified to purchase that dream home!
To show your income to your loan officer you will be asked to show proof of your income. You will need to
bring with you:
- Most recent four weeks of paystubs, to give your loan officer insight into your annual income.
- Your W2’s for the past two years to give your lender your employment history and show where your
income stream truly has been.
- If you have multiple jobs in your history or if you have had a large increase or decrease in your income,
be prepared to write a letter of explanation. Telling your story can be important—if you don’t tell your
lender, they won’t know and this can affect your ability to qualify for your loan.
Your assets are verified to ensure that you have sufficient down payment funds as well as reserve monies. Bank Statements — most lenders will request your bank statements for the past two months. If there
are any unusual or large deposits you will be asked to provide a letter of explanation describing
- Retirement funds—whether you will be using these funds for the acquisition of the home or showing
reserve assets, showing proof of your retirement funds can strengthen your loan application.
- Gift Funds—if you are fortunate enough to have a family member who is giving you gift funds to help
purchase your home, you will need a letter from them stating the amount they are giving you, what
their relationship is to you and when they intend to give you the funds. Know that their ability to give
may be called to question and that the deposit will need to be documented.
Your credit score cannot only affect your ability to secure the loan but also the type of loan for which
you qualify. The three major credit agencies will be consulted to get a glimpse of your credit profile.
Remember that a credit report is a snapshot of that moment in time—credit is fluid and always changing.
Your relationship with your lender is the cornerstone of the pre-approval process. Because Bethpage is
a credit union, not a bank, we have your best interest at heart. Let us help you start your exciting, home
buying journey by getting pre-approved for a low rate mortgage from Bethpage!