Working in the mortgage industry since 2005, I have seen some families realities of getting their dream home turn to the fear of losing that dream in a blink of an eye. This is sometimes due to them getting an online or bank pre-approval letter only to find out once they actually start the loan process that they do not qualify for that house. I was lucky enough to have worked for a top 1% producing loan officer for a few years named Hans Stone. Hans and I knew how intimidating it could be to even think about applying for a home loan. Here you are buying your new home this should be exciting and fun, and there is nothing that burst that bubble more than someone doing a deep dive into your financial life and then deciding if you are approved.
There has been so much negativity surrounding the mortgage industry since the recession in 2008 and now here you have no choice (unless paying all cash) to trust this same industry and provide them with your whole life’s most intimate financial details. I heard almost on a daily basis how I didn’t need bank statements or other documents we were requesting and how they could obtain a pre-approval online with almost no documentation so why did I need everything we were requesting. The answer to that always came easy to me, “When we issue you a pre-approval we are telling you that we can see your home financing all the way to the end and beyond”. What I mean by this is all these documents will be required by all lenders, not just the company I used to work for, so why not provide everything upfront and get ahead of most of the issues that can delay or derail your home buying experience? It also allowed us to work with you and be a true partner with you on this journey. You should know and FULLY understand what your home loan entails. This means understanding your options when it comes to down payment, mortgage insurance, conventional financing versus FHA and other government type loans, if you are impounding taxes and insurance and understanding the interest rate in which you are financing your home at and options surrounding that rate.
What is the difference between getting a pre-approval letter and being pre-approved?
Most sites you go onto that promise a pre-approval in under 15 minutes ask you basic questions of income, credit score and down payment amount, based off that they give you an amount that you are “pre-approved” for. Here is where this can go terribly wrong! This process does not account for is the following:
- Are you W-2 or self-employed?
- Does that include overtime or bonus?
- How long have you worked in your industry?
- If you are self-employed:
- How long have you been self-employed for?
- Is the income you are stating what you claim on your taxes? (If so, we also have to look into the deductions you claim)
All of those answers can affect how much of the income can be used in calculating your debt to income ratios.
- Do you have a bankruptcy or foreclosure?
- If so, how long ago?
- Is there anything else that pops up on your credit like tax liens or collection accounts.
- Other sources of credit or debt you currently have which also affects your debt to income ratios.
Debt to income ratios have guidelines on what that range they have to fall between in order to be approved for financing or affects how much you can be approved for.
- Down payment:
- Is the money already in your account? If so for how long?
- What type of account is it? If its 401K there are rules to that
- Is the down payment a gift? There are rules to that as well!
These are guidelines that all lenders must adhere to so do not get offended or mad when your loan officer asks you these questions, and I hope they ask you early enough in the process to help you avoid hurdles before it’s too late. You see there is so much more that goes into the financing of your home than I could go into in this article if you want to know more I will include Hans Stone’s information at the bottom so you can talk to a licensed expert. You have options when it comes to your home loan. You should know what your personalized options are. YOU should be the one to decide what fits your situation the best not what an online lender or bank that doesn’t take the time to know you and only knows you by your loan number and documents. Your dream home shouldn’t be a dream it should be a reality.
NMLS # 237063
First Choice Loan Service