You are a buyer in today's real estate market, visiting open houses, and each Realtor is asking the same question--Are you pre-approved? You respond that you know getting a loan will not be a problem.Â After all, you have a great credit score.Â Well my friends, a great credit score is only one piece of the crazy lending puzzle.Â Answer yes to the following 5 questions and then I can say that you have a strong, legitimate pre-approval and that you are ready to make an offer.
1. Has your lender verified and sourced your down payment?Â Â
Down payment requirements vary depending on the loan program you are pursuing.Â Remember, you will need enough money for your down payment AND closing costs.Â Additionally, the funds in your bank accounts must be seasoned funds or at least meet guidelines set forth by the lender.
2. Has your lender reviewed your tax returns and paystubs?
Lenders want to verify that you have current income and are gainfully employed.Â They also want to see your past earnings.Â Many buyers don't realize that they've taken certain deductions that can affect their ability to qualify for certain loans.Â
3. Does your debt-to-income ratio (DTI) meet lender guidelines?
In other words, is your revolving debt vs. your income at a ratio that is acceptable to the lender?Â If not, are there any debts you can eradicate to help you qualify for a loan?
4. Was the pre-approval finished recently?
Pre-approvals do have a shelf life.Â Buyers' jobs, income and bank accounts may change.Â Once you establish a relationship with your mortgage broker or lender, you can easily update your pre-approval to satisfy any seller's concerns about a buyer's ability to qualify.Â If your pre-approval is old, then get back with your lender and spruce it up.Â Update your info with your lender and you will be good to go.Â
5. Do you have a good FICO score?
This is the proxy that most buyers use to self-qualify for a loan.Â Yes, it is important but clearly, this is only one part of the big picture.Â Each loan program will require a minimum FICO score.Â Furthermore, the credit report will show any potential problems that could inhibit your ability to qualify.
My advice to those thinking about buying?Â TALK TO A LENDER OR MORTGAGE BROKER FIRST!!!Â Find out if you can get the green light to buy.Â If not, figure out what steps need to be taken so you can qualify for a loan in the near future.
For a list of mortgage professionals, please feel free to email me at Gregory@GregoryMasi.com.Â For more blogs like this one, visit me at LA Distinguished Homes.