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Do You Really Think You’re Pre-Approved?

Do you really think you

Imagine this for a minute

Have you ever been driving along, minding your own business, when suddenly red and blue lights are flashing behind you? Startled, you look in the rear view mirror and see police lights. A thought quickly runs through your mind, “What have I done now?” Then you think, “Where is the dang insurance verification?” Knowing the officer will ask two things, “Do you know why I pulled you over today?” and the dreaded question, “May I see your insurance verification and driver’s license?”

Okay ready! I’m going to share with you a few key points.

The loan pre-approval letter is similar to the verification of insurance form. These documents will verify your coverage! It’s as important to have your financing in place, before buying a home, as it is to have your insurance verification with you while driving.

I am going to explain the difference in a pre-qualification and a pre-approval letter and some of the steps in obtaining the correct approval.

Let’s get real clear on the difference between pre-qualification and pre-approval letters

In the lending industry, it’s your green light to buy a house! That little piece of paper signed by a mortgage loan officer is the gold standard which states you are a qualified buyer. In fact, according to the lending institution issuing the letter, they recommend taking you seriously.

It gets a little messy not knowing the difference between a loan pre-approval and a pre-qualification letter. There is a BIG difference between the two!

For example, this is how it works.You get a notice that your rent is going up, again, frustrated you decide this is crazy paying all this money in rent!

So, you decide to check with a few lending institutions on interest rates. In the process, you provide your social security number to one of the lenders.They proceed to run a quick credit check. Based on the answers you provided, along with the credit report, the loan officer happily states you are ready to go! Just find a house and they’ll do the rest. NOT GOOD, there is more to the story.

It’s all in the details

Alright, without going into too much detail, what should happen is a loan officer will have you fill out a loan application first and foremost. From there, the loan officer will verify the information on the loan application. Also, the loan officer will ask to see your tax returns, pay stubs, and bank statements. As well as, any other documentation needed.

The loan officer will determine debt to income ratios. As well as verify funds for down payment, closing costs and reserves. If you’re looking for a conventional conforming loan (Fannie Mae, Freddie Mac), or a government insured loan (FHA, VA), the loan officer will submit your loan file through Fannie Mae’s “Desktop Underwriter.” This automated underwriting system determines if your loan request meets “agency guidelines.”

A highly skilled loan officer will check court records for bankruptcies, foreclosures, or things along these lines. If your loan application indicates cause for concern, they will take it a step further by submitting the file to an underwriter for review. The underwriter will review the file and make a determination. The extra steps will set the stage for a full loan pre-approval. Making the effort to receive a pre-approval letter is worth it because it could avoid any surprises down the road.

A better strategy

Pre-Approval

From Our Mortgage Broker

The goal of the loan approval process is to verify information. Accomplishing this enables the lending institution to issue what is called a Pre-approval Letter.The only contingencies at this point should be the home will appraise for the appropriate value and the title is clear.

As you can see, there is a big difference in the two processes!

Another point to keep in mind is most real estate contracts require loan approval from a lender. This requirement typically has a deadline. Getting this out-of-the-way BEFORE you even start to look, is a good strategy.

Having this little piece of paper, the pre-approval gives you, as well as your potential seller, the assurance you are a fully qualified buyer. So be wise, make the effort and take the necessary steps in obtaining full approval. You can’t imagine how doing this first, will save you a lot of heartache in the future.

I hope you found this helpful and informative. Please share your thoughts in the comments section.

I’m here to answer questions or assist you with any mortgage loan needs you may have.

Give me a call today!

Michael Porcelli

Photo credits:
TheTruthAbout
Jencu– From our Mortgage broker: Flkr:cc license

 

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