Let’s be honest, getting approved for a loan can be a little nerve-racking and possibly a bit confusing. However, if you are in the market to buy a home, it’s necessary.
The best thing that you can do to escalate and enhance the chances of your offer being accepted, is getting prequalified with a lender of your choice. There are several ways to obtain mortgage financing. Some buyers go through retail channels, such as larger banks. Other buyers use smaller direct lenders or wholesale brokers. Any of these avenues can result in an excellent loan choice.
A buyer must be aware of his/her obligation to perform, when it comes to completing the purchase transaction. For this reason it’s really important to make sure that you have disclosed everything to your loan officer, so that there’s no surprises that creep up along the way in the middle of the purchase.
There are several things that your lender will always ask up front to really determine your eligibility to borrow. First and foremost, they will want proof of income (tax returns), pay stubs, W-2s and a Profit and Loss statement for self-employed individuals. Secondly, the source of the down payment should be identified. Typically, this is either coming from your personal bank account or, in some cases, these funds are being gifted by a family member (if allowable). Finally, a lender will obtain a credit report, so that they have a clear picture of any other debt obligations: auto loans, student loans, credit card payments, etc.
It is so important for every buyer to understand the benefit of having a strong prequalification letter. Ultimately, this letter accompanies your purchase offer and shows your strength as a buyer. For this reason, it is crucial that borrowers accurately disclose information to their loan officers, to ensure the timely completion of their home purchase.
One final thing about loan qualification is this. Just because you qualify for a certain purchase price, does not mean that you need to or want to actually spend that much money. For many of us, it’s exciting to know that we qualify for substantial loan amounts. I guess you could say: it is a boost to our egos. The reality is that when you look at the corresponding payments, you may re-evaluate how much “house” you want to buy.
For this reason, many loan officers will first ask their clients what monthly payment is within their comfortable range. With that information in hand, the loan officer can work backwards to determine the maximum purchase price that would achieve that specific monthly payment.
Purchasing a home is one of the most significant experiences that a person looks forward to. Every buyer should feel confident in this financial decision as they pursue the home of their dreams.