STEP 1 - Learn
STEP 2 - Calculate
STEP 3 - Prepare
Why should I get a Pre-Approval instead of a Pre-Qualification?
A Pre-Qualification is an initial assessment of your stated debt-to-income ratio, and estimates how much you may be able to borrow. It may get your foot in the door, but it is not a true application and your credit history doesn’t play a factor. Keep in mind that although this number can be informative, it is important to understand that how much you may qualify to borrow is not the same as how much you can actually afford.
Getting Pre-Approved means your lender has verified the information on your loan application against documents such as your pay stubs and bank statements. By providing these documents ahead of time to get a Pre-Approval, sellers will know that you are a serious buyer and that you have the resources to back up your offer. In turn, this allows you to shop confidently and close quicker, which increases your negotiating power.
Note: A Pre-Approval letter is not an official commitment. You will still need to complete the full due diligence and your file will be reviewed by an underwriter to determine if there are any conditions.
What documents should I be ready to supply?
Once you've applied online, your Homeseed Advisor will review your application and send you a personalized checklist that pertains to your specific loan scenario. Below is a checklist of the most common asked for documents - being prepared to gather any applicable documents from this list ahead of time will make it less overwhelming and expedite the processing of your loan.
- Copy of driver's license
- Last 2 month’s bank statements (all accounts and all pages)
- Most current retirement/investment statements (all accounts and all pages)
- List of properties you currently own (current mortgage statements, insurance and tax statements if not escrowed, and rental agreements if applicable)
Income & Employment History
- Last 30 days pay stubs (most recent)
- Last 2 years W-2s/1099s
- Last 2 years personal tax returns (all schedules; include copy of extension if filed)
- If self-employed or business owner: last 2 years corporate tax returns and YTD profit & loss and balance sheet
- If receiving social security/disability/pension income: award letters showing annual amount and duration of benefit/income
Explanations & Other Documents (if applicable)
- List of any opened credit accounts within the last 30 days
- Explanation of any recent large deposits to bank accounts, outside of normal pay
- Bankruptcy documents and discharge notices
- Divorce decree & child support order
- Settlement statement from a short sale
- Copy of trustee's deed on a foreclosure
- Copy of DD214
- Certificate of Eligibility
On a Purchase
- Copy of Purchase & Sale Agreement
- Copy of earnest money
- Indicate source of down payment (checking, savings, gift, and/or sale of home proceeds)
On a Refinance
- Current mortgage statement
- Homeowner's insurance & property tax statements
What are things to avoid when getting a home loan?
- Do not change your job. Keeping your job and having income stability is key because it shows that you will be able to make your payments and are less likely to default on your loan. You should show at least a two-year history at the same job or in the same line of work.
- Do not change bank accounts. Just like not changing your job, you will want to show stability in your banking history.
- Do not apply for any new credit or financing. Looking for new credit doesn't look good to lenders and your credit could take a hit just for inquiring. More importantly, financing something like a new car will affect your debt-to-income ratio.
- Do not make late payments or charge excessively on your credit cards. You will need to display a good track record of responsibility and that you can manage your money.
- Do not make any major purchases. Along the lines of responsibility, you don't want to make large purchases at this time, especially if you're going to need it to show reserve in your bank account to qualify or use it to pay closing costs.
- Do not make any large deposits. These can cause red flags if you don't have a good explanation as to where they came from. You'll also want to show "seasoned" money that has been in your account for at least two months.