Shop around for a loan, and shop early.
When you're ready to be pre-approved, talk to a few different mortgage lenders to find the best mortgage package that suites your needs. Don't feel you need to go to 10 different mortgage lenders; shopping around at 2 to 3 different mortgage lenders is just enough. I say this because loan packages are generally very similar and pricing tends to be comparable. Also, consult with lenders before you start house hunting. This way, you'll know how much you can borrow and which houses are in your price range.
Prepare your financial biography.
Getting preapproved means a lender will be reviewing and verifying your income, credit and assets to ensure you can make the necessary monthly payments on a house. Your lender should tell you ahead of time what you need to bring, but be prepared to include the following in your financial biography.
- W2 statements (or 1099 income statements) for the last two years
- Federal tax returns for the last two years
- Bank statements for the last few months
- Recent pay stubs and proof of other income
- Proof of investment income
Just because you are pre-approved from a lender doesn't bind you to that particular lender; it's just a promise (a conditional one) that the lender is willing to make the loan. You aren't obligated to borrow from that lender.
Don't expect to keep your same rate quote.
Remember, a pre-approval will stipulate the loan amount or monthly payment but not necessarily the loan rate. When you apply for a mortgage loan, lenders use that day's mortgage rates to estimate costs and payments. What I'm saying is just don't expect the lender to keep the same rate they pre-approved you with as the actual rate that will be available when you find a property and sign a purchase contract.
Watch your credit score.
Usually, a loan inquiry can ding your credit score. If you applied for a bunch of credit cards within a short period of time, for example, your FICO score might fall. Most lenders use some version of the FICO score to determine your eligibility for credit and what interest rates and other terms they should extend to you.
But the score ignores mortgage, auto and student loan inquiries made during the 30 days prior to scoring. So if you find a loan within 30 days, the inquiries won't affect your score while you're rate shopping, according to MyFico.com
Deal only with a reputable lender.
Sellers are now looking more closely at who the buyer's lender is. Sellers don't' want the lender to not be able to deliver on the loan, they want to see that any prospective buyer is working with a financially sound and reputable lender.
To satisfy any doubts you might have about a particular lender, visit the Better Business Bureau web site to find out what kind of reputation they have.
Remember time is ticking.
Preapproval letters and the documents they verify have expiration dates. They vary by lender, but the letters are typically valid for 90 days. So, if your still house hunting after about 60 days, and you're concerned, ask your lender to re-validate the pre-approval letter.
Also, Sellers want to be sure the buyer's financial situation hasn't changed since the time the lender initially checked them out. If any part of your financial picture has changed; your credit, job status, income or assets…you should notify your lender so you're pre-approval can be adjusted.
So, when getting pre-approved remember to keep all these things in mind; save them to your computer, write them down in your notebook. Whatever works best for you. Just make sure you remember them.
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Information resource: SmartMoney.com
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