Mortgage approval is a must before house hunting

Great information from Jim Steward


Setting realistic and obtainable goals for the purchase of a new home will make it a much more pleasurable and satisfying experience. In order to confidently know your purchaseing power you need to get pre-approved.

Pre-approval for a mortgage is obtained by applying for a home loan with a Mortgage Lender; providing income and asset documentation, and authorizing a credit report to be pulled. A loan decision will be based on the review of that information.

Don’t assume anything.

Credit scores and credit profile are critical in today’s lending world. Loan programs have specific credit requirements. No lender can accurately quote an interest rate for a specific loan program without knowing your credit score. Also, no lender can use a credit report that was not pulled by their company. It may surprise you to know that if you pull you own credit report and go the extra step of getting a credit score, that score will not necessarily be the same as when pulled by a mortgage company. The credit request from a mortgage lender has a different scoring model. I am not saying that pulling your own credit is a bad thing (in fact it is a good idea to review your credit at least on an anuual basis) but be aware that there are some differences.

Income is analyzed and your qualifying income may be more (or less) than you think. For example, if you are receiving any income which is non-taxable (such as military housing pay, social security, etc.), that pay may be calculated as greater than it actually is due to the fact that it is not taxed. On the other hand, you may get paid over time, receive a car allowance, have rental income, or some other sort of side income that you consider regular income; that income must meet guidelines based on the length of time and the consistency with which you have received it. Job history also matters. A job change or a first job after college can still be considered if your previous experience relates to it. Education and previous similar work is part of the job history. The self employed and commisioned individuals will generally need a two year history of this type of emploment.

Funds needed to meet closing costs and down payment are also reviewed. Some programs allow “gifts” from family members or “down payment assisance” from non-profit organizations. Banks statements must be provided to verify available cash for closing. VA loans for eligible military families (both active duty & retired) do not require a down payment. Also, most mortgage programs allow the Seller to pay a portion (if not all) of the closing costs.

The American Dream of home ownership is very much alive and well. Get pre-approved before you begin house hunting. On top of every thing else this is a powerful tool in your negotiations. It tells the seller that you are a qualified buyer who is not only serious but able to buy their home.