Some mortgage brokers will be so eager to get your business that they will promise you deals that are too good to be true. You can easily spot this because the offer will be much better than others you have received even though they have not asked you many questions about your financial situation.
If three loan officers quote you an interest rate of 7 percent and a fourth gives you a 5 percent quote based on a prequalification, you should carefully compare the good faith estimate documents. It’s likely something isn’t right with the lower offer.
In order for a prequalification to be helpful in the mortgage loan process, it must be based on accurate information. So it’s best to bring your income documents and bank statements, so that the loan officer can plug in the most up-to-date information for their analysis.
If you do not have documentation handy, you will need to estimate how much you make each month and how much you have in reserves. Do not over-estimate, because you will get an incorrect analysis and waste your time.
The importance of your credit score
It is also best to have your loan officer pull your credit report. If you had another mortgage broker run a credit report within the last month, you can use that report.
Your credit score is very important in the loan application process, but there are other factors that a lender will need you to have in place. For instance most lenders require you to have three or four lines of credit such as credit cards or students loans.
If your credit score is 800, but you only have one or two lines of credit, you will most likely need to establish more. Different lenders have different rules about how long these credit lines must be open. Some will overlook the fact that one is new if the others have been open and active for at least one year.
If you have been late on a previous mortgage or rental payment — and it shows up on your credit report — you will need to wait at least a year before applying for a loan. Lenders will not lend money to you with a late mortgage payment in your recent history.
Use your instincts when you are seeking prequalification. You want a loan officer who is professional and thorough. Don’t get fooled by a fast talking mortgage broker.