So if you have been shopping for a home, chances are you have submitted facts that has been used in "pre-qualifying" you for a home loan. Pre-qualification (also sometimes called a pre approval) is a term used in mortgage loan circles meaning that a loan officer has taken some facts from you, the inherent borrower, and made a tentative decision, but not verified much of, if any of it.
Typically in a pre-qualification, the inherent borrower is asked for their collective protection number, their employment, earnings and asset facts and the amount of current monthly debt. In addition the inherent borrower is asked about their normal reputation worthiness. This facts is then swiftly worked up and contrasted against business standards for qualifying reputation scores and debt to earnings ratios.
Based on this quick work up the inherent borrower will be told that they pre-qualify up to a confident mortgage loan amount. For example, if the borrower makes ,000 / month this is then calculated to an industry-standard ratio of debt to earnings (which can vary depending upon mortgage loan program), for example 36%. So if a borrower makes 00/month they would be pre-qualified at a total debt of 80 (this includes any monthly payments, together with car & reputation card min. Amount; along with the proposed cost of principal, interest, taxes and insurance).
Dependent upon the loan schedule you choose, other factors that may be included in determining your pre-qualification status...monthly residual earnings (that earnings remaining after paying all monthly obligations and family support), middle Fico score either or not you are a first time home buyer, if the refinance has a "cash-out" amount requested, either or not you have had a bankruptcy or foreclosure, how many times you have been late on a mortgage cost and how recently, your earnings type and the way you will verify your earnings (W-2, tax returns, bank statements, etc). Additionally, asset type, asset use, loan-to-value ratio (Ltv), purpose of loan all play into the over all potential to qualify for a mortgage loan.
If you are preparing to shop for a home and will be seeking a mortgage loan, it would be a good idea to gather the following and allow your mortgage lender to delineate them thoroughly.
If Employed:
Most up-to-date Two Years of W-2's
Most up-to-date Two Years of Federal Tax returns together with all schedules
Most up-to-date pay stubs surface 30 days
Most up-to-date monthly bank checking and savings statements (include all pages/even blank pages)
Most up-to-date monthly investment account statement (include all pages)
Most up-to-date 401K/ Ira/ Cd statement (include all pages)
If Self Employed
Most up-to-date Two Years of Personal Federal Tax returns together with all schedules
Most up-to-date Two Years of firm Federal Tax returns together with all schedules
Most up-to-date 60 Days bank checking and savings statements (include all pages/even blank pages)
Most up-to-date 60 Days investment account statement (include all pages)
Most up-to-date 401K/ Ira/ Cd statement (include all pages)
Year to Date profit and Loss Statement
If You Own Rental Properties
Rental Lease for a minimum of 12 months if you will be renting your current property
Copy of most up-to-date asset tax statement
Copy of most up-to-date homeowner's guarnatee notification page
Copy of most up-to-date Hoa statement if applicable.
Do's and Don'Ts while your home shopping and home purchase periods.
Do save money
Do send payments on time
Do pay cash for common items
Do keep reputation balances under 50% of reputation limit
Do keep reputation card accounts open even if equilibrium is paid off or zero
Do keep down cost funds in one account with minimal activity
Do Not open new reputation accounts
Do Not take out new buyer loans or other credit
Do Not pay off collections (without consulting your Loan Counselor)
Do Not buy a new car, truck or motor home (wait until after the close of escrow)
Do Not close accounts with a zero balance
Do Not pay down reputation balances or pay off reputation accounts (without consulting your Loan Counselor)
For questions or comments please email hugh@themortgagecity.com
What is a Mortgage Pre-Qualification?