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Steps To Get Pre-Approved For a Mortgage - YouTube
Channel: Wealthy Millionaire
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hi i'm kylie matu and welcome to wealthy
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millionaire today we're going to talk
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about how to get pre-approved for your
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mortgage
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disclaimer i'm not a lawyer i'm not a
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real estate agent i'm not an accountant
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so please always make sure to reach out
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to a professional first
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[Music]
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so how do you get pre-approved for a
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mortgage
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if you're in the market for a new home
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and you require a mortgage it's
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essential that you get a pre-approval
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first
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a mortgage pre-approval document proves
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that a lender has already agreed to loan
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you a certain amount of money for you to
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buy your home
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pre-approval can help streamline the
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home buying process and make your offers
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more competitive
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getting pre-approved also allows you to
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know your budget
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and house hunt accordingly
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however to make sure your pre-approved
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mortgage goes through
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you want to make sure that your home
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meets specific criteria and that your
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financial situation doesn't change
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drastically during the home shopping
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period
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so why should you get pre-approved a
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mortgage pre-approval isn't necessarily
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mandatory however getting pre-approved
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makes the home buying process more
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efficient and provides an opportunity
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for you to compare loan options and
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solidify your budget
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it is important to be clear on your
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budget and the monthly repayments you
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can comfortably afford
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this saves you time as you can eliminate
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homes that are out of your budget
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it also prevents you from committing to
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a home that will stress your finances
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for years to come
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pre-approval also shows sellers and real
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estate agents that you're a serious
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buyer and can afford a home
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sellers want to know that a buyer can
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follow through with the financing and
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being pre-approved gives you a much
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higher chance of having your offers
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accepted and securing your dream home
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some people wonder if a mortgage
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pre-approval will hurt your credit score
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well during the pre-approval process a
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lender assesses your credit worthiness
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then they determine the amount of money
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that you can borrow and estimate your
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monthly payment this will show on your
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credit score
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and like any credit check that can lower
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your credit score however if you're
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seeking a pre-approval from multiple
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lenders in a short amount of time
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they will only count as one hit on your
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credit report
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getting a pre-approval follows a review
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of a buyer's financial profile
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a favorable financial profile quickens
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loan and mortgage pre-approval and will
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qualify you for better rates
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lenders base a pre-approval on the
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following key factors
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assets and liabilities credit score
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credit history
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debt to income ratio and employment
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history
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there's two terms that people like to
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use pre-approval and pre-qualification
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most people use these terms
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interchangeably however they refer to
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different processes pre-qualification is
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an estimation of your loan amount and it
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only involves a soft credit inquiry so
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no documentation is necessary for that
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process
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therefore the lender only relies on your
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presentation of your financial situation
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unlike a pre-approval
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getting qualified doesn't involve any
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commitment on the part of the lender the
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mortgage rate they offer you could go up
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when you return to take out a mortgage
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and pre-qualification documents can't
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stand in for pre-approval when making
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your offer on a home
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so a few things a lender will require
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as an overview for the pre-qualification
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is your finances income debts
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pre-qualification is helpful when
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shopping and comparing loan terms
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however it carries no weight as sellers
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and real estate agents don't take it
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seriously
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a pre-approval is more of a detailed
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process you'll need to fill out a
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mortgage application and provide your
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social security number the lender will
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use this number for a hard credit check
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they're also going to want to see your
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bank account information assets debts
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income employment history as well as
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past addresses
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with a pre-approval the lenders checked
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and verified your documents in order to
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offer you an accurate loan amount
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the specific loan amount that the lender
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offers you will hold for several months
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so you shouldn't be surprised by the
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high rates or a lower loan amount when
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it comes time to take out your mortgage
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so when would be a good time to get a
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pre-approval
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pre-approval letters are actually valid
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for 60 to 90 days they have an
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expiration date because a buyer's
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finances and credit profile can change
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over a long period of time
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if your pre-approval expires you'll need
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to fill out a mortgage application with
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updated paperwork you may not be able to
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get the same loan that you were offered
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previously
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it is advisable that you seek
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pre-approval six months to one year
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before a serious home search
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this gives you time to address any
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credit issues identified and improve
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your financial standing as necessary
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you'll also have more time to save for a
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down payment and closing costs
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how long it takes to get pre-approved
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depends on your lender and financial
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complexities if you're lucky you can get
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pre-approved within days or even hours
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of applying
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the application process involves filling
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out a mortgage application and this
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application can be quite demanding
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a mortgage application has eight main
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sections
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so let's take a look at them first
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the type of mortgage and terms of the
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loan
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so this section details the particular
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loan product you're seeking and it
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includes the loan amount and the terms
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such as loan repayment duration and
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interest rate
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second is your property information and
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the purpose of the loan so this section
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provides information on the relevant
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home and how the loan will be used
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so this includes information like your
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address
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a legal description of the property year
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of development loan purpose intended
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types of residency
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third is your personal information so
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this section regards to your identifying
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information such as your name your birth
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date social security number years of
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schooling marital status number of
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dependents and address history
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next is your employment information
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so this section includes the name and
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contact information of your current and
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past employers dates of employment title
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and monthly income
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next is your combined income and monthly
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housing so this includes things like
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your base monthly income
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any overtime bonuses commissions
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rental incomes
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dividends or interest
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any other monthly incomes
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and monthly combined housing expenses
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so number six is assets and liabilities
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so they're going to take a look at
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things like your bank and credit card
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statements life insurance stocks bonds
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retirement savings mutual funds accounts
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liabilities and debts
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next they're going to look at the
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details of the transaction
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so the purchase price
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loan amounts the value of improvements
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and repairs that need to be done the
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estimated closing cost buyer paid
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discounts and mortgage insurance if
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applicable
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number eight they're going to look at
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any declarations so any judgments liens
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past bankruptcies or foreclosures
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pending lawsuits or delinquent debts
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whether a u.s citizen or you're a
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permanent resident as well whether you
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intend to use your home as a pri primary
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residence or not
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so your next steps would be that your
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lender will provide you
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with a loan estimate and the law
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requires the lender to do so within
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three working days of receiving your
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application
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the loan estimate is a three-page
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document that states you have a
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pre-approval and outlines the following
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there will be a loan amount
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terms and type of mortgage interest rate
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estimated interest and payments
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estimated closing costs including any
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lender's fees
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an estimate of property tax and
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homeowners insurance
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so once your application closes your
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loan file goes to a loan underwriter the
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underwriter will review all documents
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against the information on your mortgage
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application they will ensure that you
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satisfy the requirements of each
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mortgage program
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so there are many documents required for
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pre-approval you also need to put
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together documents to verify the
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information that you provided so these
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include things like bank statements for
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the last 60 days pay stubs previous two
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years w-2 tax returns
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scheduled k-1 for self-employed
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borrowers
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income tax returns
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asset account statements and a driver's
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license or u.s passport
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there are some factors that impact your
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pre-approval it's essential that you
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understand what lenders assess in your
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financial profile so this information
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will help you maximize your chances for
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pre-approval
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these factors include debt to income
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ratio which is called dti
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your dti is the amount of monthly debt
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you have outstanding as a percentage of
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your monthly income
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you typically need a dti of 43.
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or lower to qualify for your mortgage
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and the lower your dti the lower the
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interest rates that you can qualify for
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then there's the loan to value ratio the
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ltv
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the ltv is the loan amount divided by
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the home value so the best way to lower
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the ltv is to make a larger down payment
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on the home as this lowers the loan
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amount
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if you're struggling to make a
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substantial down payment you may want to
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look into an fha loan
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these loans only require a 3.5 percent
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down payment meaning the fha maximum
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loan to value ratio is 96.5 percent
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lenders will also take a look at your
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credit score so they'll review your
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credit history to see what kind of
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credit lines you have open and if you're
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consistently paying your bills on time
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they'll also evaluate your credit score
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so you generally need a score of 620 or
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above to be approved for a mortgage
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your employment history and income so
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lenders will look at the past two years
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w-2 tax forms to ensure you have a
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stable enough income to commit to a
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mortgage
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you'll also have to show bank statements
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to prove that you have saved enough for
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your income to afford a down payment and
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closing costs
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if your financial standing is not strong
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enough to qualify for a mortgage that is
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sufficient and affordable for you
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consider taking some time to pay off
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some debts and save some money
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this will put you in a better position
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to qualify for a loan and get a lower
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interest rate
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after the lender takes a look at your
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application they could make one of the
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three decisions
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pre-approved congratulations if you're
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happy with the terms of the mortgage
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that they offered you can start shopping
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for houses within your budget
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two you get denied in this case the
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lender needs to explain to you the
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reason for this decision and it's also
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necessary that the lender provides
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sources to resolve the issues that led
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to the denial
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you'll likely have to take some time to
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improve your credit score or savings
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before trying to apply again
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or three pre-approved with conditions in
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this scenario the lender may require
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that you provide additional documents
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you may also need to lower your dti
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ratio by paying down some credit
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accounts
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this condition could also include
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withdrawing from your 401k for the down
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payment
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purchasing a home can be an intimidating
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and scary process i hope this episode
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helped i'm kylie mattoo and thank you
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for watching wealthy millionaire
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[Music]
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you
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