Loan Qualification

Once a buyer has fixed any problems on their credit report, it’s time to contact a mortgage loan specialist at a bank, credit union or mortgage company. DO THIS BEFORE YOU CONTACT A REAL ESTATE AGENT. There’s no point in wasting your time or the agent’s time to look at properties if you don’t know your likelihood of obtaining a mortgage loan, or the size of that loan.

Some pitfalls a buyer might face when applying for a loan include:

  • Insufficient down payment funds
  • Insufficient funds in bank or brokerage account to make 2 mortgage payments
  • Employed for less than 2 years
  • Insufficient income to cover projected mortgage payment plus existing debts
  • Poor credit score

To streamline the process, bring the following items to your loan officer interview:

  • 2 years of business and personal tax returns
  • 2 years of W2’s
  • 30-day pay stubs
  • 2 recent bank statements

They will review your credit report online. The documents will give them more confidence in writing a Pre-Qualification letter, and they will have all the information they need to submit your information to a lender for Pre-Approval.

A Pre-Qualification letter from the loan originator will state something to the effect that after speaking with the client and reviewing their credit history, they believe the individual will be approved for a <insert dollar amount> mortgage loan. This is a good letter to submit with your purchase offer because it indicates that you have at least spoken to a loan professional, but it’s not the best option.

A Pre-Approval letter states that the lender is offering to lend you <insert dollar amount> based on current conditions. The offer is usually good for 90 days. The lender will need all of the above-mentioned paperwork in order to make this decision. If you are competing against other buyers, a Pre-Approval letter gives you an advantage over other comparable offers. However, not all lenders will issue a Pre-Approval letter, and cash is king. A reasonable cash deal will usually win the competition if there are multiple offers.

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