While many homebuyers understand that contacting the right mortgage lender is important, some of the other details however, become foggy. The mortgage process has many layers and often includes quite a bit of paperwork.
Before the “fun part” of delving into a home search takes place you will need to prove that a bank will lend you the funds needed to purchase a home – or in some cases how much that is. Consumer Financial Protection Bureau (CFPB) is designed to help buyers understand their loan options and shop for the best mortgage. In their “Know Before You Owe” initiative to make the mortgage process easier, a website with full information was designed for reference. That website can be found here:
PRE-APPROVAL. Once you have selected a lender you can trust the next step is the Pre-Approval process. A loan officer will require documentation to determine qualification. This can include:
• Credit Report
• Pay stubs
• Current Federal Tax return
• 2 months of bank/investment statements
At this point your credit will be reviewed. The loan data will then be put through underwriting. It can be a period of weeks or months from the time of pre-approval to an actual accepted offer. During that time the loan officer will (or should) address anything that comes up on your credit. (This would be a great time to AVOID large purchases or charging that new couch on your credit card).
Each situation is unique and requires experienced professionals. It is also worth mentioning that you should ask plenty of questions during the entire process.
Typically you will get a PREQUALIFICATION LETTER, this is when the interview and credit review are complete. As long as all the paperwork aligns with the lenders parameters this is the letter you will likely get. Several other types of letters are:
PREAPPROVAL LETTER. This happens when the lender takes an extra step in examining credit, assets and income. While many lenders use the phrase “preapproval” for letters, the most common type of letter is the prequalification mentioned above.
COMMITMENT LENDER. When the loan hasn’t received the final approval stage, the commitment letter shows that the loan is approved conditionally under the current circumstances. Basically, the underwriter is saying that so long as everything remains the same you qualify with the information provided. This would be the ideal situation, but given the timelines most sale agents work with, achieving those requirements can be challenging. Should you want to pursue this, it will need to be requested.
When you have one of these letters in-hand, then the home search can truly begin. Being one of the biggest investments you will make, keep in mind that the entire process will take time. It is best to go into this journey with patience and preparedness.
If you have questions and would like to discuss how you can start the journey to owning your next (or first) home, call Cathy Hernandez a licensed REALTOR® with Coldwell Banker D’Ann Harper, REALTORS®!
(210) 483-4663 OR send us an email PR@CBHarper.com