What is involved in getting pre-approved for a home loan?
My husband and I want to buy our first house. We're looking to buy a cheap starter home and work on it ourselves. We'd like to have payments around what we pay for our apartment now. With 6.5% interest, we'd achieve that with the ones in our "price range".
How do you get pre-approved for a home loan? Do they run your credit? Meaning you'd have 30 days to buy a house or it would wreck your score? Or do they look at your W2's and a recent paycheck stub? We're new to this. So any advice/info would be much appreciated.
Since that is considered a "hard hit", how much would it drop my credit score? And should they run both of ours? Or just my husband's?
- loanmasteroneLv 71 decade agoFavorite Answer
You are making the correct choice in the purchase of your first home. Get pre-approved first, not pre-qualified.
In order to find out the type of loan programs you are qualified for you will have to fill out a loan application, with a mortgage broker, which you can find one in your local telephone book. Make sure this mortgage broker or banker is able to do government loans such as FHA and VA loans if you qualify for one.
He will fill out this application, which takes awhile so grab your favorite beverage and sit down. Once you have completed the application, he will run your credit report which will have your credit scores. These credit scores will determine your interest rate.
The amount of your monthly debt payments you are required to pay as per your credit report and the amount of mortgage you can take on based on your income will determine the amount of house you will be able to purchase.
When you speak with the mortgage broker you will need the following documents to complete the loan application, there will be others, but this will get you started.
#1 One month of pay stubs for each person that will be on the mortgage.
#2 Six months bank statements from each bank in which you bank as well as statements from any 401K from you place of employment.
#3 Two years of federal income tax along with the W-2 that match.
Once he has all that he need to do he can then issue you a pre-approval letter so you can purchase a home. In this pre-approval letter will be the amount of house you are qualified to purchased.
Once he gives you this pre-approval you may now find a real estate agent to find yourself a home or he might have a referral.
Now make sure before you get your pre-approval you and your mortgage broker go over all your options as to the mortgage programs you qualify for, the interest rate, monthly payments.
If you are getting a FHA, fixed rate, two loans to eliminate PMI like an 80/20 or one loan, if you are qualified for and approved for a 100% loan.
You should select the loan that best suit your financial condition at the time. That could be an adjustable rate loan. It could be a fixed rate loan for 5 or 10 years and then adjust. Some adjustable rate mortgages only adjust once.
Make sure your mortgage broker explain all your options so you may make an intelligent decision.
What might be good for one person might not be good for you, in other words just because your friends and all your real estate buddies are telling you about the great fixed rate they got, your financial situation might call for something else.
So select the best option for you and your financial situation.
You should also get a Good Faith Estimate (GFE) which will indicate the cost you will have to pay for getting this loan. It will also indicate the amount of your down payment.
Once you have found a home the real estate agent will then prepare a contract for you and the seller to sign.
Your mortgage broker will now order an appraisal to show proof of the property value.
The mortgage broker might ask for additional information or documentation, don't get all up tight this is normal, just supply the information or find the documents needed.
After the appraisal has been completed you will be called by your mortgage broker to sign your loan docs so you can take possession of your new home.
Before signing any loan docs make sure they say exactly what you and your mortgage broker went over when you decided on what mortgage program was best for you.
I hope this has been of some use to you, good luck
- glennLv 71 decade ago
Ask local friends and relatives who they have used to borrow money for a home loan. Get local recommendations. Call a couple of those and see who will get you a good loan. Dealing on the Internet will be anonymous and if there is any hitch you will be all alone with no help.
A good loan officer could talk with you and answer all your questions. There are ways they can pre qualify you without hurting your credit.
In making the loan they would check both you and your husband's credit reports through three credit reporting agencies. If one of you has bad credit they may can structure it so that only the good spouse will have their credit checked, but then only the "good" spouse will have their income counted also.
- webcrafterLv 61 decade ago
When you want to get pre-approved, go to your local bank and talk to a loan officer.
Yes, a credit report is pulled - that's what determines interest rates and the amount you qualify for.
Debt-to-income ratio is another factor.
Your best bet is to go to your bank or credit union - the process takes less than 5 bsuiness days.
Best of Luck!
- Luv2AnswerLv 71 decade ago
We recently became pre-approved. They ran a credit check on both people applying for the loan, copies of last 3 months bank statements and last 2 pay stubs to verify salary. The purpose of the bank statements is to make sure you aren't bouncing checks and are maintaining a proper balance. It was pretty easy.
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- 4 years ago
If you want to use both your incomes - they will review both of your credit ratings. Could you consider renting a house? Do not do rent to own if you do - you can get kicked out and lose the own part you paid for all those years. Just save your money instead. Rent a small home - and save for a down payment on a new home. If you don't save aggressively - you will never make your dreams come true. You didn't say home much you made - so no one will tell you what you can qualify for. Google "how much house can I afford". But if FHA is turning you down - everyone else will - and that's the truth. Save, save, save so you can have at least 20% down to put on a house someday. /
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- Anonymous1 decade ago
Yes, a credit report is run, but its only a "soft hit." Preapproval is just a process to estimate what loan you can qualify for - based on credit history, income, other debt, etc. The "hard hit" occurs when you actually apply for the loan.