1. Why is a pre-approval for home financing important?
Having a home financing pre-approval completed before a home search is a necessary step in today’s competitive housing market. A lending pre-approval, a verification process provided by a properly licensed home mortgage professional, notifies all parties of a transaction that a borrower or home buyer has taken qualifying steps with a lender. The borrower or home buyer provides the lender with income, asset & credit information verbally or in document form as verification. The lender then qualifies the borrower based on the financial information the borrower provides.
Pre-approvals are typically valid for 60 days. All pre-approval documentation should state that the final lending decision is determined by the underwriter based on all the factual documentation the borrower provides.
2. Are there circumstances where a pre-approval is not needed?
Unless you are prepared to pay cash for a new home, obtaining a pre-approval is a home buying step that should not be skipped! A pre-approval should always be required before a home buyer submits an offer on a home. Preferably the pre-approval process should happen before the home search even begins. Having a proper pre-approval alleviates unnecessary surprises and gives the borrower (and home sellers) peace-of-mind to move forward with a transaction.
3. What financial events change what is stated in a lender provided pre-approval?
A pre-approval usually states that the income, assets and credit have been verified. The amount of loan and % of down payment the borrower is applying to their purchase is defined. It also outlines any specific conditions to the pre-approval such as “pre-approval is based on the borrower selling their current home”. Any information change in the borrower’s verification documents (income, assets, or credit) could also change the terms and conditions of a lending pre-approval.
4. How long is a pre approval good for?
Pre-approvals are usually good for 60 days or possibly less IF there is a significant change in assets, income, employment or interest rate. Home buyers should get pre-approved before looking at homes to understand the terms and financial obligation of the potential new loan.
5. For a more favorable outcome, what can borrowers do before the pre-approval process?
Borrowers should have an idea of what their credit score is. Potential borrowers should avoid making any additional “financed purchases” resulting in more debt. Additional debt can impact how much a home buyer is qualified to borrow. If possible, it is wise to pay down any debt on high balance credit cards. Prior to an official pre-approval, I can evaluate a borrower’s credit situation and suggest easy steps to increase the success of loan approval.
6. As a lending professional, how do I make the pre-approval process easier for my clients?
I treat any loan like a financial audit. While that may sound daunting, I only get what I know the loan underwriter needs, nothing more or less. With 35 years of lending experience, I can easily identify any financial sticking points that need addressing. For convenience, I can take the information needed over the phone, pick up original documents, make copies for the borrower and return the originals shortly thereafter. I will work around my borrowers schedule (7 days a week and evenings included) to make the process as seamless as possible for them.