How do you qualify for a loan?
The idea of meeting with a lender can be intimidating, especially if you’re buying your first home. After all, this is probably the biggest purchase you’ll ever make!
Take a deep breath and relax—you don’t have to be stressed. Think of your first meeting with a lender as a get-to-know-you session. They’ll simply want to learn a few basics about you and your financial situation.
Then comes the paperwork! Once your loan process gets started, be prepared to provide proof of:
- Where you work
- Your income
- Any debt you have
- Your assets
- How much you plan to put down on your home
Do I need great credit to get a mortgage?
Not necessarily, but it will certainly help. It is possible to get a conventional mortgage with a FICO credit score as low as 620, and you can obtain a higher-cost FHA mortgage with a score in the 500s.
However, be aware that the lower your score, the higher your interest rate will be. You can find a current list of mortgage rates broken down by credit score here.
On a $250,000 mortgage, the difference between a 620 credit score and an “excellent” 760 adds up to more than $86,000 in interest savings over the life of a 30-year loan.
Can you get a mortgage without a credit score?
This is one of the most commonly asked mortgage questions, and the answer may surprise you.
If you’ve paid off all your debt—and we recommend you do before buying a home—it is possible you won’t have a credit score when you meet with a lender. That might make you nervous. But don’t worry; you can still get a mortgage.
If you apply for a mortgage without a credit score, you’ll need to go through a process called manual underwriting. Manual underwriting simply means you’ll be asked to provide additional paperwork for the underwriter to review personally. Your loan process may take a little longer, but buying a home without the strain of extra debt is worth it!
Not every lender offers manual underwriting. Do a little research on the front end to find the ones in your area that will.
What is a pre qualification?
A pre qualification is a basic review of your finances to determine if you would qualify for a mortgage.
In general, a pre qualification is based on unverified information you provide and does not include a credit check or any documentation, and is therefore not a firm guarantee of a loan.
What is a pre approval?
Unlike a pre qualification, a pre approval can be a highly useful tool in the home buying process. It’s essentially the same thing as applying for a mortgage, just without a specific home attached to it.
As part of a pre approval, a lender will check your credit, verify your income and employment, and commit to lending a certain amount of money.
A pre approval can show sellers that you’re serious about buying a home, and that you’re likely to be able to follow through on a bid, and close on their property.
What’s the difference between being pre qualified and pre approved?
A quick conversation with your lender about your income, assets and down payment is all it takes to get pre qualified. But if you want to get pre approved, your lender will need to verify your financial information and submit your loan for preliminary underwriting. A pre approval takes a little more time and documentation, but it also carries a lot more weight.
A pre approval takes a little more time and documentation, but it also carries a lot more weight.
Which is better? Think of pre qualification as an initial step and pre approval as the green light signaling that you’re ready to start your home search. When sellers review your offer, a pre approval means you’re a serious buyer whose lender has already started the loan process.
What documentation should I gather?
Your lender may ask for many different items, but in general, be prepared to show all of the following:
- Income verification (Last two years’ tax returns, W-2s, 1099s, and your last few pay stubs)
- Drivers’ license and Social Security card (or alternative ID)
- Bank statements
- Proof of funds to close (and an explanation of where they came from, if it’s not obvious)
- If some or all of your down payment is coming from a gift, you will need gift letter from the source of the funds that confirm they are gift, not a loan.
What happens after you get pre approved for a home mortgage loan?
Getting preapproved for a mortgage is just the beginning.
Once the financial pieces are in place, it’s time to find your perfect home!
While it’s one of the most exciting stages of the process, it can also be the most stressful. That’s why it’s important to partner with a buyer’s agent.
1
Qualifying
Most people are intimidated by the mortgage process. This section answer questions like:
- How to Qualify
- Credit Requirements
- Documents
2
Loan Types
There are many different types and terms for loans. This section covers the most popular options.
- Fixed Rate or Adjustable?
- 15 Year or 30 Year?
- Mortgage Points
3
Costs
How much does the home buying process cost? This section covers information like:
- Down Payment
- Closing Costs
- How Much to Save
4
Payments
How much can you expect to pay on your mortgage? This section covers loan management.
- How Much Can I Afford?
- Mortgage Payments
- Do Payments Change?
5
Timeline
How long does the whole process take? This page details answers to questions like:
- Average Timeline
- What happens At Closing
- Why It Takes Time
6
Getting Started
The best way to get started is to fill out a pre qualification form, that way we can help you 1 on 1 for your situation.