I am back in the saddle after the birth of our third child – and I am ready to help you close on your home purchase!!! Here are some tips on how to get an error-free pre-approval so you can get your contract offer approved and close EARLY!
- Income Documents – This is probably the most important item – even more so than credit. Be prepared to bring or scan and email your recent paystubs and W2’s for last 2 years for all jobs being counted to qualify. ALSO – Full tax returns are typically required (all pages, signed). – HORROR STORY – You are a W2 employee and your LO only gets your paystubs and W2’s. They fail to ask you for your full 1040’s – even when they see that 30% of your income comes from commission.. When they submit to the underwriter, they will require full tax returns. I have seen deals like this where there is a Schedule C business on the side that the client forgot to mention (because they don’t really make any money at it – but write off a good deal of expenses). Without seeing those tax returns in advance, the lender is in a tight spot – and if the losses on the Schedule C are too high it could cause our application to be denied.
- Credit Review – Have a general idea of what is on your credit. I have had clients come to me and say “Yeah, i have this, that, etc… and last I checked my score was 700″… only to find out they also co-signed for 3 cars for their children, all of which were not paid on time and they really have a 500 credit score. There are numerous websites that offer services to monitor your credit – some cost money, others are no or low cost. I’ll post links at the bottom of this website that may prove helpful for people who want to keep their eyes on their credit.
- Assets – I always try to see recent bank statements from clients prior to issuing a Pre-Approval. If someone tells me thy have $10,000 in the bank – then I find out they really have about $500 – it changes the nature of how we approach the file. Many programs like FHA allow Gift Funds to be used to cover down payment and closing costs – but as the LO I need to know if that is the route we need to take UP FRONT. A gift donor would need to provide a bank statement or an online transaction log – and some people don’t wish to provide that information. Keep this in mind when thinking about where your down payment is coming from.
- OTHER – There can be a number of issues that would cause a pre-approval to be no good. Things that may not be on credit are hard to know about in advance. When I interview a client I will ask questions like “have you been on title to any home in the past 7 years?” If the answer is YES, I want to know what happened to that property. Even if the home was owned by a previous spouse or similar circumstances – if there was a foreclosure or short sale on that property that can impact your ability to buy a home.
This covers the main areas that need to be discussed to issue a pre-approval. In some circumstances on a borderline credit profile, I would ask my processing team to run the Desktop Underwriter (this is the automated Underwriting system most lenders use) to ensure we have an automated approval.
In some cases, that is irrelevant – for instance if there is a Chapter 13 Bankruptcy that was discharged less than 2 years ago. We know the Desktop Underwriter will not accept the file as-is – but the loan can still be done by many lenders as a Manual Underwrite.
I try to take ALL of these circumstances into account when issuing a pre-approval. The conversation is frank, but lighthearted and with a clear goal in mind of ensuring the pre-approval we issue is valid and we can close the loan.
Here are links to the main 3 Credit Bureaus – you can setup a profile to keep track of what is on your credit.
In my upcoming posts I will do a spotlight on a few Chicago Neighborhoods. There are so many great areas of the city and suburbs and I think it would be fun to share my experiences and thoughts about some of them.
Mike Heitz – Mortgage Loan Originator – NMLS 323846
A & G Mortgage Solutions, Inc – Company NMLS 149977
Phone: 708-409-8000 Fax: 708-409-0260
10450 W. Cermak Rd Westchester Il 60154