- 1. Getting Pre-Approved
- 2. Submitting Additional Financials
- 3. Getting an Appraisal
- 4. Overcoming Underwriter Objections
- 5. Funding the Loan
You’re going to need an actual lender or mortgage broker to take a good look at where you stand financially, and tell you what price range you can qualify at. Also, no seller will look at your offer without a pre-approval. Here is the list of the four sets of documents needed
- Pay Stubs (2 months) – The bank approving your loan is going to need this to see how much income you are making.
- Tax Returns (2 years) – The banks want to know how much you currently make and for how long you’ve been making it. Don’t be afraid if you make more income now vs. in the past or vice versa.
- All Assets & Statements – Gather up all your checking and saving account balances, your IRA, 401k, stocks, any additional properties you own, etc. Even if you don’t plan on pulling money from your IRA account as a down payment, they still want to see how much money you are worth.
- FICO/Credit Score –Banks are going to want to know how responsible you are with making payments and carrying debt.
- How Credit Scores Work
After your offer is accepted, you need to submit new and more detailed information to the lender processing your loan. Remember that getting pre-approved is a quick snapshot of your financial standing. Now that you’re actually starting the full process, the lender is going to need all the additional documentation that you didn’t give before.
Along with you qualifying personally for a loan, the property also has to qualify. An appraiser is a third party individual who acts like the bank’s eyes and ears. The appraiser will look at the property that you’re buying and determine the value using other local and similar properties as a guideline. For example, if your offer on a property is for $400,000 and you plan on getting a loan for $360,000, then the appraised value of the property must STILL be at least $400,000! In other words, you can’t over bid on a property and try to get a loan for it. The bank uses the appraiser to make sure the house is worth what you’re paying for it.
After the lender has all of the documentation that they need, including the appraisal, they will submit a full package to the bank that will be approving your loan. The person who takes a look at your file with a microscope is called the underwriter. Their whole objective is to nit-pick, and find any reason why you shouldn’t be given the loan from their bank. It is extremely common once the underwriter looks at your file, to ask for more financial paperwork, updated statements, and even ridiculous explanations.
Once the underwriter has been completely satisfied, you will be asked to sign a large set of loan documents. After you sign these loan documents with a notary, your file is overnighted back to the bank. It is around this time, you will be asked to wire the rest of your down payment and shortly thereafter the bank will wire their funds as well. When the title or escrow company has all the funds from you and the bank, they will record the deed, and finally the home is all yours.