Be preapproved for a home in Castle Rock, Colorado.
Whether you are renting or just thinking about a new home, the first step is to be preapproved for a home before you ever start looking for the home! First, you need to know what a preapproval means, and then I'll give examples on why you need to be preapproval for a home in my next post.
Many lenders and real estate agents will ask you to at least be prequalified before you start your search for a new home. While that's a good start, it's not enough! A prequalification merely indicates that your credit has been pulled, and your income is sufficient to qualify for a maximum monthly payment based on your verbal disclosure. To be preapproved for a home, however, a formal income analysis can get a little tricky. Not all income is always considered acceptable income for the purpose of obtaining a final loan approval. In order to actually be preapproved for a home, your income will be scrutinized to assure a minimum of a two year history in the same line of work has been established. Also, the income must continue usually for three years. When commissions, bonuses, overtime, etc, is being used, there must be an acceptable history of such. To be preapproved for a home means your source and breakdown of income has been examined by an underwriter.
The next step to be preapproved for a homeis to have your liquid assets reviewed. Even if you are obtaining a no down payment loan such as a CHFA loan, lenders may want to see that you have "reserves" or excess funds remaining after closing to cover unforeseen housing expenses should they arise. Copies of bank statements are usually provided to show you have sufficient liquid assets. Sometimes a review of the bank statement may trigger additional questions by the underwriter. If so, it's wise to provide explanations right then in order to to be preapproved for a home before you go shopping for one.
And even though I mentioned the credit report review, there are so many things on a credit report that one set of eyes might miss when the goal is to be preapproved for a home and not just prequalified. Depending on personal circumstances there may be additional documentation that may be requested to be preapproved for a home that might not be asked when simply being prequalified. Once you get the paper work out of the way, you'll be able to enjoy the hunt for your perfect home!