Becoming pre-approved with a lender is not “harder” now than it was before. The same process existed for a Full documentation loan as it did previously. Gone are the “stated” loans where, if you had a good enough credit score, you did not have to provide much more information other than your salary.
Here is a step by step guide for what you can expect in the residential mortgage process. We are going to try to cover all the steps as completely as possible. We are outlining a full documentation loan. This is the typical, and usually the best scenario for most people.
STEP ONE ‘ GET ORGANIZED
Get your financial information ready, use this as a check list of everything that applies to you.
Two years tax returns
Two months most recent pay stubs
Two years W-2’s
Two month rental checks or mortgage payments
Two months bank statements
401-K or retirement
Stock, bonds, money market statement (investment)
List of all real estate owned, addresses, tax information, and estimated value
List all automobiles, equipment, collections, and any other ‘asset’ or item of value you may have. List alongside each asset, any debt associate with the asset, and provide a monthly billing statement for that payment.
Get a list of all your debts and current monthly statements
Loans: mortgages, credit cards, auto loans, school loans, lines of credit, store cards, etc
Any judgments or tax liens, or payment programs for collections
Child support / alimony warrants or payments being made
Copy of your divorce or separation agreement if applicable.
STEP TWO ‘ GET PRE-QUALIFIED OR PRE-APPROVED Two terms, two distinct meanings:
Pre-qualified: A very simple process where you bring in a pay stub or speak with a consultant and answer some basic questions about your finances. Your credit report may not even be checked at this moment. A very quick outline of an approximate value of an estimated mortgage amount you might be able to afford or pay. A very basic consultation and determination. Get the idea that a pre-qualification may not be worth much? However, if you are just starting to look at homes, at a minimum, you should be pre-qualified. Many real estate agents will not show you properties, and many buyers of higher end homes are requiring potential buyers present a pre-qualification letter before you can view the homes listed.
Pre-approved: Very close to a complete application, and in many cases, an application has been completed and you only need to select a home that fits your criteria to finalize the process. This is really the next step to be done. At this time, your credit score has been obtained, all the documents in step one have been reviewed, and you have an exact range as to what you can afford and a few loan programs you will qualify for. A broker will be able to shop your loan out to at least three lenders to get you the best terms for you to review and select.