It is strongly encouraged. Prequalification is an opportunity to learn about different mortgage options and provides an estimate for what you might be able to comfortably afford to borrow.
Multiple factors are considered when determining how much you can comfortably afford. Consider monthly income, credit score, monthly expenses, savings, down payment, current interest rates, and housing values. This is discussed with your loan officer during the pre-qualification phase.
A down payment is money that is given upfront and goes directly towards the principal which helps lower the mortgage. The amount varies depending on the type of loan. A higher down payment may help lower your interest rate and build equity in your home quicker.
There are numerous types but the most common is fixed rate and adjustable rate. Fixed rate allows you to keep the same monthly principal and interest payments. You can choose 10, 15-, 20-, 25-, or 30-year payment term with low down payment options. Adjustable-rate mortgages are best for those planning to own their home for a short period. The interest rate is fixed for 5, 7, or 10 years and will vary after. Rest assured, we will assist you with finding the right loan for you.
FHA Mortgage
Federal Housing Administration loan is a loan insured by the government that offers down payments as low as 3.5%. This does not require a low-moderate income to qualify.
VA loan: I’m a veteran, any special home loan program available?
If you are a veteran, active-duty member, Guard, or Reserve member, you may qualify for a VA loan. This loan has low or no down payment options available and doesn’t require mortgage insurance which can allow for a lower monthly payment.
Your credit score significantly affects your loan qualification, loan type, and interest rate. Generally, higher credit scores mean better rates but you may still qualify for a mortgage loan. We will review your credit score with you and ensure it is accurate. If there are any issues, it should be corrected immediately.
Credit scoring can differ among creditors and credit types. Multiple factors may affect your credit score but the extent of improvement is based on the creditor-specific model used for credit evaluation.
Credit scoring models examine the following information in your credit report:
- Payment History: Late payments, accounts sent to debt collections, or bankruptcy declarations can negatively impact your credit score.
- Outstanding Debt: Debt-to-limit ratios are evaluated. The higher the ratio, the more likely your score will be impacted.
- Credit History Longevity: Longer credit records are more favorable. A shorter history might impact your score.
- Recent Credit Inquiries: Recent credit inquiries are assessed. Excessive new credit applications may impact your score negatively.
- Number and Types of Credit Accounts: While established credit accounts are advantageous, excessive credit cards could negatively affect your score.
To improve your credit score in most models, prioritize timely bill payments, reduce outstanding balances, and refrain from accumulating additional debt. Significant score improvements typically require sustained effort over time.
You are entitled to receive one free credit report every 12 months from each nationwide consumer credit reporting company – Equifax, Experian, and TransUnion. This free credit report may not include your credit score and can be requested through the following website: https://www.annualcreditreport.com
– Equifax: (800) 685-1111
– Experian (formerly TRW): (888) EXPERIAN (397-3742)
– TransUnion: (800) 916-8800
Below is a checklist of documents necessary when applying for a mortgage. However, individual circumstances may require additional documentation. In such cases, prompt cooperation in providing requested information can expedite the application process.
Property Details
– Signed sales contract with all riders
– Verification of the deposit made on the home
– Contact information of realtors, builders, insurance agents, and attorneys involved
– Listing sheet and legal description (if available)
Income Verification
– Recent 30-day pay-stubs and year-to-date income
– W-2 forms for the past two years
– Employment history for the last two years
– Explanation for any employment gaps in the past two years
– Work visa or green card (front and back copy)
For Self-Employed or Additional Income Sources
– Complete tax returns for the last two years
– Year-to-date profit and loss statement
– K-1 forms for partnerships and S-Corporations
– Federal Partnership (1065) and/or Corporate Income Tax Returns (1120) if ownership position is 25% or greater
Alimony, Child Support, Social Security, Disability, or VA Benefits
– Divorce decree/court order for alimony or child support
– Proof of receipt of funds for the last year
– Award letter from the agency or organization for Social Security, Disability, or VA benefits
Source of Funds and Down Payment
– Copy of signed sales contract for the existing home (if applicable)
– Bank statements for the last three months
– Statements from broker or certificates for stocks and bonds
– Gift affidavit and proof of receipt of funds for gifts contributing to the down payment
Additional Documents
– List of all current debts with copies of the last three monthly statements
– Mortgage holders and/or landlords’ information for the last two years
– Marital settlement/court order for alimony or child support obligations
– Application fee(s) check
Based on your application and credit report, additional documentation may be required.
Mortgage rates have the potential to fluctuate between the time of loan application and the closing. A sudden change in interest rates during this period can unexpectedly change the borrower’s mortgage payment. To mitigate this, lenders may offer to “lock-in” the loan’s interest rate, which will ensure that it remains fixed for a specific period of time, typically up to 60 days.
An appraisal is an unbiased, professional evaluation of a property’s fair market value. This is completed by a qualified licensed appraiser, in which an in-person inspection is conducted and report is generated based on floor plan, amenities, location, home size and condition, etc. An appraisal is often required for loan approval to ensure that loan offered aligns with property’s market value. The appraisal fee is paid by the buyer.
