So if you have been shopping for a home, chances are you have submitted information that has been used in “pre-qualifying” you for a home loan. Pre-qualification (also sometimes called a pre approval) is a term used in mortgage loan circles meaning that a loan officer has taken some information from you, the potential borrower, and made a tentative decision, but not verified much of, if any of it.

Typically in a pre-qualification, the potential borrower is asked for their social security number, their employment, income and asset information and the amount of current monthly debt. In addition the potential borrower is asked about their general credit worthiness. This information is then quickly worked up and contrasted against industry standards for qualifying credit scores and debt to income ratios.

Based on this quick work up the potential borrower will be told that they pre-qualify up to a certain mortgage loan amount. For example, if the borrower makes $3,000 / month this is then calculated to an industry-standard ratio of debt to income (which can vary depending upon mortgage loan program), for example 36%. So if a borrower makes $3000/month they would be pre-qualified at a total debt of $1080 (this includes any monthly payments, including car & credit card min. amount; along with the proposed payment of principal, interest, taxes and insurance).

Dependent upon the loan program you choose, other factors that may be included in determining your mortgage pre-qualification status…monthly residual income (that income remaining after paying all monthly obligations and family support), middle FICO score whether or not you are a first time home buyer, if the refinance has a “cash-out” amount requested, whether or not you have had a bankruptcy or foreclosure, how many times you have been late on a mortgage payment and how recently, your income type and the way you will verify your income (W-2, tax returns, bank statements, etc). Additionally, property type, property use, loan-to-value ratio (LTV), purpose of loan all play into the over all ability to qualify for a mortgage loan.

If you are preparing to shop for a home and will be seeking a mortgage loan, it would be a good idea to gather the following and allow your mortgage lender to review them thoroughly.

IF EMPLOYED:

Most recent TWO YEARS of W-2’s
Most recent TWO YEARS of FEDERAL TAX returns including all schedules
Most recent pay stubs covering 30 days
Most recent monthly bank checking and savings statements (include all pages/even blank pages)
Most recent monthly investment account statement (include all pages)
Most recent 401K/ IRA/ CD statement (include all pages)

IF SELF EMPLOYED

Most recent TWO YEARS of PERSONAL FEDERAL TAX returns including all schedules
Most recent TWO YEARS of BUSINESS FEDERAL TAX returns including all schedules
Most recent 60 DAYS bank checking and savings statements (include all pages/even blank pages)
Most recent 60 DAYS investment account statement (include all pages)
Most recent 401K/ IRA/ CD statement (include all pages)
Year to Date Profit and Loss Statement

IF YOU OWN RENTAL PROPERTIES

Rental Lease for a minimum of 12 months if you will be renting your current property
Copy of most recent property tax statement
Copy of most recent homeowner’s insurance declaration page
Copy of most recent HOA statement if applicable.

DO’s and DON’Ts during your home shopping and home purchase periods.

DO save money
DO send payments on time
DO pay cash for common items
DO keep credit balances under 50% of credit limit
DO keep credit card accounts open even if balance is paid off or zero
DO keep down payment funds in one account with minimal activity

DO NOT open new credit accounts
DO NOT take out new consumer loans or other credit
DO NOT pay off collections (without consulting your Loan Counselor)
DO NOT buy a new car, truck or motor home (wait until after the close of escrow)
DO NOT close accounts with a zero balance
DO NOT pay down credit balances or pay off credit accounts (without consulting your Loan Counselor)

Author Bio: HC Tanner is a Mortgage Banker with over $400 million in loan origination volume in Conventional Loans including FHA Loans, and VA Loans.

Category: Real Estate
Keywords: va loan, va loans, fha loan, fha loans, mortgage loan, mortgage loans, home loan, home loans,