Cleveland Home Buyer Education Series: Documents Needed for Loan Pre-Approval
I often get asked by Greater Cleveland Home Buyers:What do I need to do to get pre-approved for a loan?
In order for a buyer to write a purchase offer to buyer a home, virtually all sellers will require to know the buyer has the financial capacity to purchase their home. The proof that the buyer has the financial capacity lies in buyer obtaining a verified pre-approval letter.
Buyers often ask me what documents do they need to submit to a Mortgage Loan Officer (who can work for a bank, savings and loan, mortgage banker or even mortgage broker) who is responsible who will then collect all the documents, go through a process (oftentimes an automated process) to determine what loan amount the buyer qualifies for.
Note: Each lender may have slightly different requirements. Some loan products require more or less documentation, so these are general guidelines.
Here are the items that one local lender in Northeast Ohio requires:
1. W2’s & 1040’s for the Last Year.
2. Most Recent Pay Stubs
3. Checking, Savings, C. D. & Investment Statements with ALL Pages.
4. Proof of Pension / Social Security Income – Award Letters.
5. Self-Employed – Y-T-D Profit & Loss and Two Years Company Tax Returns.
6. Copy of Divorce Decree and Separation Agreement – If Applicable.
7. Bankruptcy / Discharge Papers – If Applicable.
8. Copy of College Degree (if graduated within the last 2 years.)
9. VA Loans – DD214 & Certificate of Eligibility.
Lenders may look for a history of NSF (non-sufficient funds) or overdraft charges, large deposits which have not been verified, child support payments, recurring debt payments, if a recent gift has been made or a future gift will be required,
Sometimes lenders will use Fannie Mae’s Desktop Underwriter software program to obtain an “automated approval.” Freddie Mac has a similar software program named Loan Prospector.
So…before before a buyer decides to look at homes, this is the first step in the process, to get a verified pre-approval so you know exactly how much you qualify for. Then, an analysis should be done by the buyer to determine a monthly payment the buyer will feel comfortable paying with each month, given the current interest rate available to the buyer given their credit profile. A buyer should create a realistic budget of all their total income and expenses (of which their mortgage payment of principal, interest, taxes and insurance) as well as reserving funds for maintenance of the home as well as budgeting for periodic replacement of major components (roof, windows, furnace, AC, H2O tank, concrete driveway, appliances, etc.)
Getting pre-approved for a loan is a pretty quick and painless process to go through.
Most lenders will have a buyer pre-approved (assuming everything goes okay) in one day.
I have had a buyer contact me on Monday morning, by lunchtime, they have had their documents to Jennie Smith, and by the end of the day, I had a pre-approval PDF document in my inbox. It's that easy. On the other hand, sometimes there can be some credit repair, or mistakes on credit profile, etc., that may prevent a buyer from being pre-approved for a loan and a good loan officer can help you resolve these items to help position you so you can obtain the best loan possible.
If you are in need of one of the best local/regional lenders and Mortgage Loan Officers in all of Northeast Ohio (both in terms of interest rates, fees and customer service), feel free to contact Jennie Smith, Mortgage Loan Officer at First Place Bank. Jennie can be reached at 440.716.8244 (Direct) or 800.300.8013 x7602 or firstname.lastname@example.org. Note: I do not receive any financial benefit from recommending Jennie and First Place Bank -- they are just the best in the business in my opinion.
Read other posts in the Cleveland Home Buyer and Seller Education Series: