Why Get Pre-Qualified?
1. Pre-qualification acts as a dry run of the loan application process. The mortgage lender will use details you provide about your credit, income, assets and debts to arrive at an estimate of how much mortgage you can afford. The whole process may take only minutes or a few hours at most, and is free.
2. While a "pre-qual" is non-binding to the lender (because the information you provide has not been verified), it does serve as a good indication to potential sellers of your general creditworthiness.
3. These days most sellers will NOT accept an offer without at least a pre-approval letter, so if you are serious about buying this is the first step towards getting you in your new home.
Mortgage Brokers and Lenders - Who Does What?
The mortgage broker will be your main contact throughout the loan process. They are often able to work with a number of lenders who actually provide the funds for the loan. Typically, the lender pays the mortgage broker a fee for acting as the intermediary and providing customer service.
Filling out the Application
There are standard forms to be completed when applying for a loan. Some mortgage brokers keep these on their website so you can fill out and submit the forms online. The information will be verified and used to qualify you for your loan, so take the time to answer questions accurately.
The mortgage broker will need copies of the documents you began gathering in the first phase of the loan process, including:
- 2 years of W-2 forms from your employer or 2 years of tax returns if you are self-employed
- Pay stubs from the last 2 months
- 3 months bank and money market statements
- Brokerage, mutual fund, and retirement account statements
- Proof of other income sources (alimony, trusts, rental income, etc.)
- Credit card statements
- Auto/boat/student/personal/miscellaneous loans
- Drivers’ license or other government issued form of identification
- If you’re not a US citizen, a copy of your green card or visa
- Copies of any existing mortgage debts
Stay in Communication
The lender will have an analyst, usually called an “underwriter,” verify your income information and documentation to confirm your ability to repay the loan. Once you are under contract on a property, there may also be a loan approval committee which will meet to review the underwriters’ conclusions regarding your creditworthiness, and to evaluate the property on which they are lending. This is called the underwriting process, and questions are bound to arise. Be sure to return your mortgage broker’s calls promptly to keep the process moving forward smoothly and check in with your broker periodically.
When the lender is ready to “close” your loan, or “fund” it, your real estate agent and mortgage broker will have you sign the final loan documents. Signing will typically take place in front of a notary or an escrow officer. Ask your mortgage broker if there is anything you need to do to prepare for this, such as bringing a photo ID or perhaps a cashiers’ check. Allow yourself enough time to review the documents for accuracy.
|If funds are being wired: Wiring instructions direct the electronic transfer of money between financial companies. If possible, arrange to have the wiring instructions in place ahead of time and checked for accuracy by both the sender and recipient of the wire. It is critical that these instructions be exact, and even so, delays are common.|
Your mortgage broker will call you to confirm that the money has been transferred and the loan has closed. Always follow up with a phone call to confirm that your loan funds went where they were supposed to go. It is a good idea to keep records of this critical phase of the transaction once completed.