Mortgage Pre-qualification, Pre-approval, and Approval Process

Mortgage Pre-qualification, Pre-approval, and Approval Process

Mortgage Pre-qualification, Pre-approval, and Approval Process  

If you are ready to make your dream of homeownership a reality, then you have probably already heard that you should consider getting prequalified or preapproved for a mortgage. It’s important to understand what each of those terms means. When you are working toward a major life goal like buying a home, you want every advantage and tool in your homebuying arsenal. 

In this article, we will discuss the mortgage prequalification, preapproval, and approval process and what to expect from all three:

Mortgage Pre-qualification 

When you pre-qualify for a home loan, you are getting an estimate of what you might be able to borrow. Many first-time homebuyers find that getting prequalified is helpful, especially when they are establishing their homebuying budget. Pre-qualification also provides the opportunity to learn about different mortgage options you may not know about and work with a lender to identify the right fit for your individual needs and goals. 

Keep in mind that you may qualify to borrow more money than you are comfortable spending on a home. But that doesn’t mean you have to spend more. It’s always a good idea to limit your home search to houses priced at an amount you can comfortably afford and obtain a mortgage amount that easily fits into your overall budget. 

Mortgage Pre-approval 

Pre-approval is as close as you can get to confirming your creditworthiness without having a purchase contract in place. Getting preapproved is a smart step to take when you are ready to put in an offer on a home. It shows sellers that you can secure a mortgage, which makes it more likely that you will complete your purchase of the home. Because you have had your finances and creditworthiness verified, sellers will be more likely to consider you a serious buyer.  

With a pre-approval, you will complete a mortgage application. The lender will verify the information you have provided and perform a credit check. If you are, in fact, preapproved for a home loan, you will receive a pre-approval letter, which is an offer (but not a commitment) to lend you a specific amount of money, which is good for 90 days. Lenders will look at every detail of your finances when granting pre-approval. Be prepared to answer lender questions as soon as they come up.

How Long It Takes To Get Pre-qualified or Pre-approved 

Pre-qualification and pre-approval can take different amounts of time. Pre-qualifying is a quick process and can actually be done online. You may even get results within an hour. Since you will need to supply more information for a mortgage pre-approval, it is likely to take more time. You should expect to receive a pre-approval letter within 10 business days after you have provided all of the information requested by your lender.  

Information Needed to Get Pre-qualified and Pre-approved

The information you will need to provide to get pre-qualified for a mortgage:   

  • Basic income information
  • Credit Check
  • Basic information about bank accounts
  • Downpayment amount and desired mortgage amount
  • No tax information required

 The information you will need to provide to get pre-approved for a mortgage:

  • Copies of pay stubs that show your most recent 30 days of income
  • Credit check
  • Bank account numbers/two most recent bank statements
  • Downpayment amount and desired mortgage amount
  • W-2 statements 
  • Signed, personal and business tax returns from the past two years

Pre-qualification Vs. Pre-approval Comparison

  PREQUAL  PREAPPROVAL
Benefits You can start house-hunting knowing how much you might be able to borrow You’ll be ready to make an offer with confidence—and gain a competitive advantage
Process Provide basic information to a lender and quickly get a prequalification amount After submitting documentation to a lender, you should receive a decision within 10 business days
Documentation Answer questions for this process, plus a credit check Provide proof of financial details, plus a credit check

 Factors Involved with Getting Approved for a Mortgage 

Even if you have been pre-approved for a mortgage, it isn’t an automatic final approval. Pre-approval is only the first step in the loan process and your underwriting can still be denied. Being pre-approved will make sure you have a good credit score, verify your income, and assure that you will be able to pay back the loan amount. 

Once you’ve been pre-approved, your file must then go to the underwriter who will take a much deeper look into your financial stability.  The underwriter will review your loan scenario and supporting documentation to determine whether you qualify for the loan, with the following basic criteria in mind:

  • Your ability to repay the loan – Is your income enough to cover the new mortgage payment and all your other monthly expenses? Lenders use your debt-to-income ratio (DTI) and most lenders want your debt-to-income ratio to be 36% or less.
  • Your likelihood to repay the loan. Your payment history and credit score are indicators to lenders of your likelihood to make payments in the future.
  • The home’s value – The underwriter will look at the value of the home you are purchasing to verify that it meets or exceeds the purchase price and whether the loan-to-value ratio (LTV) fits within the loan program guidelines. With a conventional loan, most lenders require a loan-to-value ratio of no more than 80-95% (The higher your home’s value and the less you owe on it, the lower your LTV).
  • The source and amount of funds for your down payment – You will typically be required to pay private mortgage insurance (PMI), which increases your monthly mortgage payment if you have a down payment of less than 20%. The underwriter will review your information to estimate whether you have enough money to cover closing costs. Lenders also typically require reserves to cover your mortgage payment in case of emergencies or unforeseen events.

As you move forward, your income, debt, credit history, down payment, savings, home value, and loan program guidelines will all play a role in whether your mortgage application is approved.

Partner with Top-rated Farmington Hills MI REALTOR® -Tom Gilliam

2020 Best of Farmington Hills REALTOR - Tom GilliamWhether you are interested in buying a home in Farmington Hills, MI, or its time to list your current property, experience matters most in a changing market. With over 20 years of local experience, Farmington Hills REALTOR® – Tom Gilliam offers in-depth local market knowledge and access to the most up-to-date listings.

Known for his professionalism and care for every detail, Tom is an expert at uncovering the perfect home for his clients’ lifestyle needs in the right Farmington Hills neighborhood or community.

Search Farmington Hill MI homes for sale

For sellers, Tom will create a comprehensive marketing plan that exposes your home to the public as well as to other real estate agents through the Multiple Listing Service (MLS), other cooperative marketing networks, open houses for agents, and so on.

Your listing will appear on all the most popular real estate sites where buyers spend hours a day looking at homes such as Realtor.com, Zillow, Trulia, REMAX, Redfin, and dozens of others. Your property will also be featured on Tom’s own highly-trafficked website Homes2moveyou.com. You can be assured that your home will get sold quickly and for the highest market price.  

Tom works very hard for his clients. He will protect your interests, advocate for you, and be your trusted guide and advisor throughout the home buying or selling process. If you or someone you know is interested in Farmington Hills MI real estate, please give Tom a call today at (248) 790-5594 or you can reach him here.

Tom Gilliam, REALTOR®
RE/MAX Classic
29630 Orchard Lake Rd.
Farmington Hills 48334
Direct: 248-790-5594
Office: 248-737-6800
Email: Tom @ Homes2MoveYou.com
License #314578

Moving Safely During The Coronavirus Outbreak 

Moving Safely During The Coronavirus Outbreak 

 

Moving Safely During The Coronavirus Outbreak  – Moving can be stressful during the best of times, but when you add a global pandemic to the mix, the task can be even more of a challenge. While social distancing is the course of action to take until told otherwise, moves aren’t always something that can wait. Maybe the home you own was recently sold or you just closed on a new home or you have to relocate for a new job.

For whatever reason you have to move right now, moving companies are still able to help you as an “essential business” and they are taking a range of precautions to ensure your move is easy and safe. If you are working with a traditional moving service, make arrangements by phone or online, and be sure to ask what sanitation practices their movers are following to reduce the risk of spreading COVID-19.

 AMSA Recommendations

The American Moving & Storage Association (AMSA) recommends that consumers and movers regularly check resources like the Centers for Disease Control and Prevention (CDC) in order to stay up-to-date on the latest news regarding the COVID-19 outbreak. Under current federal rules, movers can continue to operate their businesses. However, state governments are enforcing (each in their own unique way) social distancing and restricting permitted businesses operations to services they deem as essential.  

Moving Safely During The Coronavirus Outbreak

Below are some steps recommended by the AMSA you can take when preparing and planning your move:

  • For the health of your family and moving crew, please follow CDC guidelines.
  • Give movers the chance to serve you in the safest way possible. Notify them ahead of time if anyone in your household may have contracted coronavirus, or may have been exposed to someone who has.
  • Check your professional mover’s website and feel free to ask questions on how they are mitigating the health risks of COVID-19.
  • Some professional movers can provide virtual estimates, rather than in-home. If this is your preference,  please check with your mover to see if they offer this option.
  • Try to provide your moving crew access to a sink, soap, and paper towels throughout your move. If this isn’t practical, and it is readily available, provide hand sanitizer.
  • If you plan to pre-pack any items, purchase new moving boxes and tape from your mover; this isn’t the time to use recycled boxes from online sources, or from stores.
  • Your mover may also have plastic bins available for rental. Wipe down the interior and exterior with a disinfecting wipe before packing items in them.
  • If you have shelf-stable food you plan to throw out to lighten your load, consider donating them to  Move For Hunger to help feed people within your community.
  • Consider deep cleaning your new home before unpacking to mitigate further the risk of contracting the virus.

Research Your Movers

Hiring movers should always be a process that involves careful research before signing a contract. With the risk of the coronavirus, many companies have implemented contactless moving, where customers leave their homes while the crew comes in to pack up and load the truck. Many movers are also using video chat technology to see within customer’s homes and provide virtual quotes. 

You’ll want to make sure to ask all prospective movers about their coronavirus policies and practices, and make sure to ask the following:

  • Do you provide virtual or digital estimates?
  • Are the trucks and movers equipped with hand sanitizer, masks, and gloves?
  • Will the truck that’s transporting your belongings be thoroughly cleaned and sanitized before they are packed inside?
  • Will all equipment, such as hand trucks and sound blankets, be cleaned before your move?
  • How often are high-touch surfaces in the trucks sanitized?
  • What is your cancellation/rescheduling policy?
  • How are the movers ensuring employees aren’t sick? This could include taking their temperature on the day of the move and asking if anyone in their household is ill or experiencing symptoms.

Buy New Moving Supplies

During the coronavirus pandemic, it’s safer to buy brand-new moving supplies. Use new cardboard boxes you pack yourself. It’s actually not recommended to use plastic bins. Although COVID-19 can survive up to a day on cardboard, it can last up to 3 days on plastic. You should also pack up your own dishes, books, and clothing rather than hiring movers to do it. The fewer items touch by others, the less chance there is of getting exposed to the virus.

Keep Hygiene Supplies on Hand

Make it easy for your movers to follow necessary hygiene practices by making sure you have adequate supplies of antibacterial soap, hand sanitizer, and disinfectant wipes on hand. That way you are providing plenty of opportunities for the moving crew to wash their hands before, during, and after the move. You should also thoroughly clean and disinfect everything after the movers leave. 

The Takeaway

Being smart when moving during the coronavirus crisis requires that you follow all of the standard pandemic rules and apply them to your move. Social distancing and sanitization requirements need to be upheld. While moving is important, be sure you’re aware of all the facts and risks. Be willing to change your plans if that’s what it takes to keep you and your family healthy and safe.  

Partner with Top-Rated Oakland County MI REALTOR® – Tom Gilliam

 2020 Best of Farmington Hills REALTOR - Tom GilliamWhether you are interested in Oakland County MI homes for sale or you are ready to list your current property, top-rated Oakland County MI REALTOR – Tom Gilliam provides the kind of knowledge, skills, dedication, and personalized service you need and deserve.

Tom will take the time to listen to your needs and concerns, keep you informed every step of the way, and will go above and beyond to ensure a smooth and successful transaction!

To find out more about buying or selling Oakland County MI real estate, please contact Tom today at 248-790-5594 or you can get in touch here.

Tom Gilliam, REALTOR®
RE/MAX Classic
29630 Orchard Lake Rd.
Farmington Hills 48334
Call: 248-790-5594
Office: 248-737-6800
Email: [email protected]
License #301741

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