The pre-approval is a big issue. First of all, you really need it in order to put an offer on the house, and the realtors really like to see it. You can get pre-approved online by filling out some forms and submitting them. The problem is that you’re just filling in a form and there might be other factors that will influence your approval that a form simply can’t ask you about, such as do you pay child support or alimony, or something like that. You might get a pre-approval, use it to make an offer, and then find out afterwards that you can’t really be approved for the house. You’ve wasted a lot of your time, other people’s time, your money, and now a process that seemed so easy becomes quite frustrating.
The right way to be pre-approved is to call a mortgage advisor. Spend some time either on the phone or in-person. Let them ask the questions, run your credit, and if it’s not cut-and-dry, provide them with tax returns and pay stubs. A lot of times, prospective buyers don’t know what’s important. These days, we want to know what you’re writing off on your tax returns. When you’re filling something out online, they don’t ask you that, and you don’t think to offer that up. Most people wouldn’t even think to mention child support, or an alimony payment. It’s not a matter of hiding; it’s a matter of knowing. Ask the right questions, and get asked the right questions.
For instance, it’s important to know where the down payment comes from. If it’s all gift funds that could affect the program you’re in, then that could also affect whether you can really be pre-approved. The fees on some of the programs are higher, so you might not be approved for as much. The online form just asks how much you have for a down payment, not where it’s coming from. And sometimes where the down payment is coming from might not be a legitimate source. If you’re getting a loan from Joe down the street, that’s not a legitimate source for a down payment. Perhaps you have a stack of cash hidden in your mattress. The money is real, but this is not a legitimate source for a down payment either. There is just no way you can just take that money and use it as a down payment. So, asking where the down payment is coming from is just as important as knowing you have the money for a down payment, something the online process does not account for.
Another important differentiation the online process doesn’t account for is how your income is comprised. When asked how much you make, you might simply enter $60,000. Well that could have been $40,000 in base pay plus $20,000 in overtime. If you didn’t have overtime the year before, the lender will look at the past two years and take the average. If you have overtime, then your salary isn’t really $60,000, it could be figured at $40 or $50,000. Or, they may not accept overtime at all if it was only a one-time thing. The same thing happens with a bonus. If you only got a bonus one year and not the other, or if it’s not a guaranteed bonus, you might not be able to use that bonus as part of your income. The hardest income to verify is when you’re self-employed. In that case, you’ll really need to meet with a mortgage advisor in order to review your tax returns to see what you’re really making, what you’re writing off, what you show you’re making, and not what you actually might be putting in your pocket every week. Those are the types of questions that really need to be asked and vetted out when being pre-approved.
To avoid getting a pre-approval that’s not really a pre-approval, meet with a mortgage adviser that is trusted, or that has been referred to you. You’ve just got to do your due diligence. In the end, it makes the whole transaction easier and it doesn’t waste anyone’s time. Whether you like the answers and the numbers or not, this process is backed by solid data and solid information, giving you a solid pre-approval.
Call or email today if you’d like to get pre-approved for a mortgage!