Pre-Qualification
for Purchase Loans
Whether you are buying a new home, purchasing a second home or obtaining an
investment property, CT Liberty is here to help. Getting a pre-qualification
starts the loan process. Once a lender has gathered information about a borrower's
income and debts, a determination can be made as to how much the borrower can
pay for a house. Please remember that a mortgage pre-qualification is NOT a
mortgage approval.
In attempting to approve homebuyers
for the type and amount of mortgage they want, mortgage companies
look at two key factors: first, the borrower's ability to repay
the loan; and second, the borrower's willingness to repay the
loan.
The borrower's willingness to repay
is determined by examining how the property will be used. For
instance, will you be living there or just renting it out?
Willingness is also closely related to how you have fulfilled
previous financial commitments, hence the emphasis on the Credit
Report and/or your rental payment history.
It is important to remember that
there are no rules carved in stone. Each applicant is handled
on a case-by-case basis. So even if you come up a little short
in one area, your stronger point could make up for the weak
one.
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Processing
Once a complete application has been submitted, the processing of the mortgage
begins. This consists of ordering a Credit Report, Appraisal and Title Report.
Your loan officer will inform you of the specific documents you will need
to provide. Any verification requirements that need to be done will take
place at this point in the process. The entire mortgage package is then put
together for submission to the lender for review.
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Credit
Reports
Credit Reports should be reviewed periodically
to ensure accuracy. As of September 2005, by federal
law, you will be entitled to receive one free credit
report annually from each of the three major credit
bureaus: Equifax, Experian and TransUnion.
TRANS
UNION
P.O. Box 1000
Chester, PA 19022
Phone: 1-800-888-4213
Fax: 1-610-546-4758
EXPERIAN (Formerly
TRW)
Experian Consumer Relations
701 Experian
Parkway
P.O. Box 2002
Allen, TX 75013-0036
Phone: 1-888-397-3742
EQUIFAX
P.O.
Box 740250
Atlanta, GA 30374-0193
Phone: 1-800-685-1111
The most common score is called
the FICO score. This score was developed by Fair, Isaac & Company,
Inc. for the three main credit Bureaus; Equifax, Experian,
and TransUnion.
FICO scores are simply repository
scores meaning they ONLY consider the information contained
in a person’s credit file. They DO NOT consider a persons
income, savings or down payment amount. Credit scores are based
on five factors: 35% of the score is based on payment history,
30% on the amount owed, 15% on how long you've had credit,
10% percent on new credit being sought and 10% on the types
of credit you have. The scores are useful in directing applications
to specific loan programs and to set levels of underwriting
such as Streamline, Traditional or Second Review, but are not
the final word regarding the type of program you will qualify
for or your interest rate. For more information on credit scores
pleaseclick here.
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Required Documents
Every loan will be tailored to your specific needs whether it will be full documentation,
stated income, no income verification, or no documentation. Typically on a full
documentation loan, the required documents you will need to provide are as follows:
• Prior two years W2’s
• Pay-stubs covering the last 30-days
• Asset statements
• Homeowners declaration page
• Purchase Contract (only on purchases)
Again, every lender and loan a
borrower qualifies for is different. After your application
is taken and product is chosen, your loan office will inform
you of what specific documentations you will need to provide.
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Appraisal
Basics
The lender will require an appraisal from a state licensed or certified
appraiser for the subject property. An appraiser is a third party vendor and
therefore requires payment directly from customer at the time of appointment.
The appraiser traditionally interprets the market to arrive at a value estimate.
As the appraiser compiles data pertinent to a report, consideration must be
given to the site and amenities as well as the physical condition of the property.
Considerable research and collection of data must be completed prior to the
appraiser arriving at a final opinion of value.
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Closing
Once the loan is approved, the file is transferred to the closing and funding
department. The funding department notifies the broker and closing attorney
of the approval and verifies broker and closing fees. The closing attorney
then schedules a time for the borrower to sign the loan documentation.
At the closing the borrower
should:
