BUYERS - PRE-APPROVAL

First off, the definition:

'Pre-approval is a more in depth assessment of the amount that a person can afford to borrow and is done by a financial institution that will state the maximum amount that it would lend to the borrower.'

It is also an evaluation of a potential borrower by a lender that determines whether the borrower qualifies for a loan from the lender, or the maximum amount that the lender would be willing to lend. The pre-approval process involves a thorough look into the income and expenses of the borrower, including a look at the borrower's credit report and score.

The pre-approval process also involves a confirmation of income and a credit check on the borrower. As long as no major income or credit changes occur between the time of pre-approval and the actual purchase of a home (e.g. the closing), the dollar amount of pre-approval can be expected to remain the same. The process may take anywhere from a few minutes (for an online lending application) to a couple of weeks. A non-refundable fee may be charged for the process.

A pre-approved mortgage is still subject to review once a specific property has been chosen, so the dollar amount is not guaranteed. A pre-approval may be lowered or even revoked if the property in question may be difficult to resell in the real estate market due to preconditions, location and other factors.

A pre-approval letter is what you want to get before looking at homes to buy because pre-approval consists of a Uniform Residential Loan Application form 1003, credit report(s) and FICO scores, Automatic Underwriting System (AUS) findings and supporting documentation and a pre-approval letter is usually good for 60-90 days.

Lastly, our pre-approval process permits you to shop for a home with a higher degree of confidence. Below is a list of documents needed to allow us to establish the loan amount for which you qualify. It will also help you to meet your contingency and closing date requirements.

Mortgage Checklist

INCOME:

• Federal Tax Returns: Last 2 years - complete with ALL pages and schedules (state returns are not needed).
• W-2's: Last 2 years (1099's and/or K1's, if applicable).
• Pay stubs: Most recent consecutive pay stubs (must cover minimum 30-day period).

ASSETS:

• Bank Statements: 2 months of most recent bank statements with ALL pages.
• Investment/Retirement Statements: Most recent 401K and/or IRA statements (if applicable).

OTHER DOCUMENTS:

• Copy of Driver's License for identity verification (Permanent Resident Card or Visa, if applicable).
• Copy of gift checks and deposit slips.
• Copy of listing and binder/contract (we can get this form for you).
• Mortgage statement showing taxes and insurance for all properties owned.

(Go here to download the above checklist.)

REQUIREMENTS

EMPLOYMENT

For most types of mortgages, 2 years employment history is required. Proof of this consists of tax returns, W-2's and paystubs (if regularly employed) or 1099's and/or K-1's (if self employed). Additional documents may be required. Some mortgages (such as a CHFA) only require 1 year employment history. For more information about the different types of mortgage loans available, go to the following link: Buyers - Financing.

CREDIT

We break down credit scores into 4 "grades":

Grade	Scores	Interest Rates	Down Payment	Down Payment Assistance ?
Excellent	over 700	lowest	lowest	yes
Good	600-700	low	low	650 or better credit
Fair	500-600	low to medium high	low to high	no
Poor	below 500	highest	highest	no

But just what do all these grades mean ?

• Excellent: lowest current interest rates, down payments as low as 3-3.5 % or even lower with a down payment assistance program.
• Good: low interest rates, down payments as low as 3-3.5 % or even lower with a down payment assistance program (650 + credit required).
• Fair: low to medium high interest rates (est. 4.5 - 9.5 %), down payments generally ranging from 3.5 % (580 + credit required) to 30 %
• Poor: highest interest rates, down payments generally 35 % or more, limited conventional financing qualification or private lender (if you can find one).

NOTE: VA loans require no down payment. Only earnest money deposit required. An earnest money deposit is a small deposit paid to seller and used to reserve property for buyer, taking it off market, pending completion of remaining steps to close the sale. Additional down payment(s) may be required.

INCOME

We feature 3 mortgage calculators to help find you answers to common mortgage questions.

Well that's all folks for pre-approval. Again, if you have any questions, don't hesitate to...