First-Time Homebuyer's Guide: Part 4
With help from friends, online research resources and a friendly, knowledgeable real estate agent, you’ve found the home of your dreams! Now comes the crucial part of the home-buying process: applying for the loan. More than anything, a clean loan application can get you to the closing table fast. Once the underwriting department clears your file, a pre-approval letter will tell sellers and their agents that you’re a serious, committed buyer.
Streamline your home loan application
The one thing to remember going into the home loan application is to err on the side of more, not less. Though certain aspects of the application can sometimes seem trivial and unnecessary, it’s important to give your loan officer everything up front, whether you think it’s relevant or not.
To help you navigate the home-buying process, this trio of industry experts weighed in on winning strategies for getting your mortgage application right the first time:
“It’s always in the best interest of the homebuyer to let us know their complete situation so we can put them in the right loan product. However, I’ve always been of the mindset that it is the loan officer’s responsibility to expand upon what is asked in the application. Delays happen when we don’t have all of the necessary information up front and have to backtrack. —Tom W., Senior Loan Officer
“Knowing what income can actually be used on the application is a recurring issue. This can be a huge source of misunderstanding for homebuyers. For many programs, we can only use base income if we have a two-year history of bonuses and commissions.” — Joann B., Mortgage Consultant
“My advice for homebuyers: when asked for bank statements and tax returns, each side of every page must be submitted. We have to verify all information, not just that which the borrower deems relevant. Also, when the two most recent statements are requested, one from July and one from February won’t cut it. Attention to detail is especially important for self-employed homebuyers because they’ll need more documentation than those with W-2s.” —Shane J., Consultant Vice President
“Buying a new home without disclosing debts or debt history is next to impossible. Whether it’s tax liens, a judgement against you, bankruptcy, whatever—all debts and negative financial impacts need to be reported. Believe me, we’ll find them eventually, so for the sake of time it’s best to get it all out there from the start.”—Joann B., Mortgage Consultant
After you’ve submitted the mortgage application, the lender’s underwriting department will review it to determine your status as a potential borrower. If underwriting has a favorable outlook on your ability to pay the loan, they can offer you a pre-approval letter indicating that you’ll most likely secure financing. With a pre-approval letter in your hand, you can go forward with confidence, clarity and a better sense of control.
The benefits of securing a loan pre-approval letter are significant:
- No time is spent looking for homes outside your price range.
- Real estate agents and sellers know you’re a strong buyer.
- Purchase offers are backed by official documentation.
Though a pre-approval letter gives you an advantage over other buyers, don’t confuse it with a final approval. Final approval is granted when you close on your home. With a pre-approval letter, real estate agents are more likely to make the extra effort on your behalf, knowing that your search for the perfect home is legitimate and serious.
In next week’s First-Time Homebuyer’s Guide…