Once you’ve found a Realtor to represent you, the next step is to get preapproved by a mortgage lender. As Realtors, we won’t put an offer in on a home for a client unless he or she has been preapproved, because the seller needs to be assured that you qualify to buy their home.
It’s also important that you know how much you can comfortably afford to spend on a home, what your monthly payments will be, what interest rate you qualify for, and how much you’ll be paying each month in taxes, etc.
Having a good mortgage lender is a crucial part of ensuring a smooth transaction. Working with a bad mortgage lender can make the process very painful and put your purchase in jeopardy of not closing on time or at all. You could also lose out on your dream property because your mortgage lender was disorganized and couldn’t get you fully approved during underwriting, etc. That’s why it’s important to work with the best.
My Recommended Lenders
First United Bank
Phone: 210-619-2690 email: firstname.lastname@example.org
First Commercial Bank
Phone: 830-401-6012 email: email@example.com
Gateway Mortgage Group
Phone: 210-862-2885 email: firstname.lastname@example.org
To prequalify online: www.gatewayloan.com/apply-online
Paperwork You Need
Each lender has different requirements regarding what documentation they need from you for the preapproval process, but in general, expect to provide the following items:
- A completed application. The lender will provide this to you directly
- Last two years of tax returns, all schedules and W2s.
- Two most recent bank statements
- Most recent asset statements: 401K, IRA, stocks, bonds, etc.
- One month paystubs
The lender should be able to pre-qualify you verbally based on a condensed version of information given. For example, they can pull a credit report once you provide your social security numbers, birthdates, and current address. They will ask for your salary and current debt information to determine the approximate amount you can afford. You will need to submit all documentation to obtain a solid pre-approval letter.
Getting a Pre-Approval Letter
Generally, once you submit the above items to your lender you should receive a pre-approval letter within 2-3 business days. The lender may ask for additional documentation. They are not trying to be difficult, but underwriters became much stricter regarding the loan approval process so a lot more documentation is needed today than it was 10 years ago. In addition to receiving a pre-approval letter which shows the amount you can afford to purchase, you should ask your lender to show you what that preapproval amounts into in terms of a monthly mortgage payment plus any PMI (private mortgage insurance if you aren’t putting at least 20% down), taxes, and insurance. That way you can make sure you are comfortable with what your monthly housing payment will be. Once you’ve received your pre-approval letter, forward it to me for your file so I have it when we are ready to submit an offer.
Get a Loan Estimate and Understand Your Closing Costs
In addition, mortgage lenders are required to provide you with a Loan Estimate (LE) within 3 days of receiving your pre-approval. The LE provides an estimate of the closing costs you’ll need on top of your down payment and shows exactly what fees the mortgage lender is charging you. Make sure you understand these fees. Generally, we estimate closing costs to be approximately 2% of the purchase price of the property. Your lender can provide you with more detailed estimates based on your exact pre-approval price. Remember, these closing costs are due at closing (except for the appraisal and inspection fees which are due on the day those services occur) and are on top of your down payment. Therefore, if you’re buying a $500,000 property and putting down 20% towards the loan you’ll need to have $112,500 cash available at closing ($100,000 for your down payment and approximately $12,500 for the closing costs).
Should You Shop for Your Loan?
Absolutely. Every lender charges different fees and different interest rates so it’s crucial you shop your loan around to at least two lenders, in my opinion. We recommend waiting 2-3 weeks between meeting with lenders as the lender will need to pull your credit report in order to give you an accurate preapproval letter. If your credit is pulled by various lenders in the same week it could affect your credit by a few points. If you wait a few weeks between having your credit pulled it generally won’t affect your credit at all.
Questions about the pre-approval process? Call me at 830.305.5248 or email me at email@example.com.