Pre-Approval Process

Pre-approval = Stress Relief

By being pre-approved you will make the home buying experience an enjoyable one.

A pre-approval is something of a commitment for both sides, both buyer(s) and loan officer/lender. First, you agree to go forward and you give the loan officer a check to cover the cost of a tri-merge (3 bureaus) credit report. This is an important first step as many credit reports have errors and this allows the time to correct (clean up) those errors so a “clean” credit report can be submitted to the targeted lender. Second if there are any credit situations that need to be explained or handled this can be done as well.

After an initial consultation (either by phone or in person) discussing your wants and needs, maximum purchase price, projected monthly housing expense payments, your ability to qualify and the types of loan products/programs right for your situation and comfort level, you will supply the loan officer with the documentation needed to support your income, employment and assets.

A loan package is then put together using your credit report, loan application, income and asset documentation and proposed loan/purchase price scenario.

You will then receive a “Good Faith Estimate” in the mail giving you a good idea of the cost involved in purchasing a home (in addition to the down payment) under the proposed “made up scenario”. This includes title and escrow fees, appraisal, lender fees, prepaid interest, recording and notary fees, flood certification, etc. Note that just because you receive the “Good Faith Estimate” from the loan officer/mortgage broker, all these fees are not theirs. They are paid to a variety of parties involved in the purchase transaction. Since we do not know the actual purchase price or loan amounts and a lock of interest rate does not occur until you are “in contract” on a specific property, the purchase price, loan amounts and interest rate are estimates. These all will be adjusted to the actual figures once you are “in contract” on a specific property. You will then receive a new “Good Faith Estimate” in the mail reflecting the real figures.

The loan package is sent to the lender and usually after one or two days the lender sends a written commitment to the loan officer that they are committed to the borrower under the terms submitted and now you just need find a property.

Pre-approvals are good for about 90 days. Along the way, if you update the lender with new income/asset documentation your pre-approval can go on for longer. Also, after 90 days a new credit report needs to be run to make sure there has been no drastic changes with the respect to your outstanding credit balances and timeliness of payments.

The pre-approval shows the seller you are serious about purchasing a home. It gives you a “leg up” on buyers who have not been pre-approved. The pre-approval establishes parameters for you and your real estate agent to narrow your search. And it gives you peace of mind you have done the math with your loan officer, you have an idea of the possible costs in purchasing your home, your monthly housing expense and an understanding of the financing product you will obtain with regards to your mortgage.

All this enables you to go out with your real estate agent with confidence and be able to “pull the trigger” and make a decision to purchase a home and not have second thoughts because of the unknown financial aspect of the transaction.

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