2. Pre Qualify
Now that you have your list of features you want in your new home, you are ready to start looking! Well, not just yet. You are going to need to know in what price range to look. There are two ways to go about this. You can get prequalified or preapproved for a mortgage.
Either way, you will need to contact a mortgage company. There are some key differences between prequalification and preapproval for a loan that you need to be aware of. Loan prequalification is a simple process. It takes into account very basic information regarding your financial status and gives you an amount for which you may qualify. This can be done strictly on a verbal level or electronically over the Internet. The prequalified amount is based solely on the information you provide. In most markets, prequalified buyers usually hold little clout compared to preapproved buyers due to the fact that the information given during the prequalification process is not thoroughly investigated and therefore may be unreliable. Where a preapproved buyer is actually approved for a loan of a certain amount, a prequalified buyer is only told that they might be approved for a certain amount.
Pre-approval is a much more involved process. The lender will take all pertinent information regarding your finances and perform an extensive check on your current financial status. This will ultimately give you the exact amount that you will be eligible for (depending on what type of loan you decide to go with). Being preapproved lets the seller know that you have gone through an extensive financial background check and there should be no unexpected obstacles to buying the home. You can see how being preapproved would be more attractive to a seller than just being prequalified.
10 Questions to Ask Your Lender
Be sure you find a loan that fits your needs with these comprehensive questions.
1. What are the most popular mortgage loans you make? Why?
2. Which type of mortgage plan do you think would be best for us? Why?
3. Are your rates, terms, fees, and closing costs negotiable?
4. Will I have to buy private mortgage insurance? If so how much will it cost and how long will it be required?
NOTE: Private mortgage insurance is usually required if you make less than a 20-percent down payment, but most lenders will let you discontinue the policy when you’ve acquired a certain amount of equity by paying down the loan.
5. Who will service the loan? … your bank or another company?
6. What escrow requirements do you have?
7. How long is your loan lock-in period (the time that the quoted interest rate will be honored)? Will I be able to obtain a lower rate if they drop during this period?
8. How long will the loan approval process take?
9. How long will it take to close the loan?
10. Are there any charges or penalties for prepaying the loan?
10 Things a Lender Needs From You
1. W-2 forms or business tax return forms if you’re self-employed for the last two or three years for every person signing the loan.
2. Copies of at least one pay stub for every person signing the loan.
3. Copies of two to four months of bank or credit union statements for both checking and savings accounts.
4. Copies of personal tax forms for the last two to three years.
5. Copies of brokerage account statements for two to four months, as well as a list of any other major assets of value, e.g., a boat, RV, or stocks or bonds not held in a brokerage account.
6. Copies of your most recent 401(k) or other retirement account statement.
7. Documentation to verify additional income, such as child support or a pension.
8. Account numbers of all your credit cards and the amounts of any outstanding balances.
9. Lender, loan number, and amount owed on other installment loans, such as student loans and car loans.
10. Addresses where you have lived for the last five to seven years, with names of landlords if appropriate.
Above information is used with permission from Real Estate Checklists & Systems, www.realestatechecklists.com
Reprinted from REALTOR® Magazine Online by permission of the National Association of REALTORS®
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