When is the best time to do a pre-qual on an FHA loan?

Asked by David Ulrich, Queens, NY Thu Feb 21, 2013

I have been unemployed for two years and I FINALLY landed a job and am pretty eager to move but I want to make sure I am not applying too early to get approved for an acceptable amount. The job pays 70k and I start in early March. How long should I wait?

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Rich Gross, Agent, Prior Lake, MN
Thu Apr 11, 2013
Congratulations on the job. I would recommend waiting for the loan application and make sure that other things that affect your qualification are in line. You want to make sure that you have a credit score preferably at 680 or higher and if not, make sure that you pay every bill on time. If you have credit card debt, it is good to try to lower this to below the 1/3 of the approved credit limit (this improves your score).

In the meantime, start looking at homes and get educated on what is available. Any experienced agent can look at your income/debt situation and give you a pretty good estimate of what you will qualify for on the FHA.

Good luck in your search David, you picked a great time to buy a home
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Russ Douville, , Saint Paul, MN
Wed Apr 10, 2013
It's never too early to get pre-qualified or pre-approved. Previous answers about issues with credit or the loan officer are great examples of why you should start early. To get a full approval you will need to be on the job at least a month, longer if the is a probationary period. But you can look in to a pre-approval at any point.
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Susan Hoffla…, Agent, Shoreview, MN
Mon Mar 4, 2013
Well, I would wait until you're actually ready to start looking. And, I would recommend waiting at least until you've already started working at this new job. The lender is going to want to see pay stubs and your past tax returns, plus they'll want to do what's called a VOE, verification of employment with your new employer.

Never too early to get a game plan in place with a lender, though. Let me know if you'd like some good recommendations.

Good luck!~
Web Reference:  http://www.homestosellmn.com
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Manuel Ramir…, Home Buyer, California
Mon Feb 25, 2013
A pre-qualification letter requires only that you speak with a mortgage lender and verbally tell them your income and perhaps let them check your credit. They then issue a short-letter stating the general amount of money you qualify for in terms of a loan to buy a home.

So contact a good Agent soon to receive help soon.
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Claire Basti…, Agent, Fridley, MN
Mon Feb 25, 2013
Congratulations on getting reemployed! If I were you I would contact an Exclusive Buyer Agent in your area about this as soon as possible. Your EBA, which you can find through the National Association of Exclusive Buyer Agents or NAEBA.com , will help you with your financing issues.

If you are employed in the same type of industry for which you previously worked it's likely they will give you a break and allow you to apply for a loan sooner, however if you changed industries they may still want to see continuity of employment for 2 years prior to lending in many cases.

Your biggest purchase in your life requires that you make 2 wise choices; first you must choose an exclusive buyers agent if you expect to get full disclosure and complete representation without the chance of dual agency. Second, you must get the help of your EBA to find the right lender.
I am an EBA in Minnesota but I work with a lender in Tennessee who doesn't charge the loan origination fee. Also, other lenders in your area may be offering other incentives for first time buyers which your EBA should help you find as well. This is what I do for my clients.

Please let me know if you have any other questions and best of luck in your new position!
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Donald James, Agent, Edina, MN
Fri Feb 22, 2013
Hi David,
Most lenders will ask for two years tax returns, two months bank statements, and two recent pay stubs. It is a great time to start finding out who you want to work with. Ask for recommendations from your Realtor and other friends who have financed or refinanced recently. Interview at least three loan officers (just as you should interview at least three Realtors), ask for references, ask about their experience working with borrowers like yourself. Good luck with the hunt!
Web Reference:  http://www.mywra.net
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Matt Christe…, , Prior Lake, MN
Fri Feb 22, 2013

I just had a very similiar conversation with a referral from a realtor. Here is what I got back from an underwriter with one of my investors.

Projected or proposed income may not be used as part of qualification income, unless the borrower will be employed prior to the loan closing and all of the following requirements are met:
• A legally binding employee contract must be provided. Offer letters are not acceptable.
• The borrower must have started employment at the new position as per the terms of the employee contract.
• A Verification of Employment (VOE) is required to verify the borrower has started the employment prior to closing.
• Paystub from new Employer

These will be requirements for the loan to get approved, you can apply now but make sure your income on you application will line up with actual earnings.

In reguard to FHA expenses increasing, it is true, but it isnt that big of an issue in the short term. It will start going into effect April 1, 2013. I have a blog post about it here


Congratulations on the new job!

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Shelia Samue…, , Columbia Heights, MN
Thu Feb 21, 2013
It is best for you to talk to a loan officer. Most of them will ask you a few pre-screening questions, over the phone to see if you are viable candidate for a home loan at this time. He/She will also inform you how much job history is needed for them to get you qualified, what you credit score needs to be, as wel as all the other factors that may or may not affect your readiness to purchase at home at this time. Bottom line is you will be aware of where you stand.

If you are internet savy, check out first time homebuyers programs and education near your area.

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Chris Block, , Saint Paul, MN
Thu Feb 21, 2013
I think Ron made a good point that FHA is about to become more expensive, but ultimately the loan officer will compare products and give you the best reccomendation.

By the way just had one of those "horror stories" with one of my buyers that insisted on using a loan officer I have never met. He wasted a month of our time and not only did I have to fire him, but now I am scrambling with my own loan officer to save the deal. We should be fine, but man don't be afraid to get a referral from a realtor. It does not mean you have to use us as a realtor but it sure can save you headaches down the road.

For all FHA loans I am recommending buyers to review their credit status with a loan officer 12 months before purchase. It just seems like every buyer I have dealt with in the past 2 years has needed credit repair to get the scores up to FHA's 640 minimum. I also run into a lot of buyers who don't have the minimum 3 credit profiles with 12 month's continuous payments. Granted, most of my buyers are first-time homeowners so this is all new to them. I don't expect conventional buyers with 700+ credit scores and rock-star credit to need this, but I am a firm believer in playing it safe and planning.

It seems like a long time, but some of my buyers NEEDED almost a full year to get their credit right. It takes literally a couple hours to fill out the online application so the lender can pull your credit and give you some basic info.

So I have found that yes we all procrastinate on the financing and yes most buyers don't fully understand what it takes to get a loan today. We always think that there will be no issues, and rarely does someone plan on a worst case scenario where it could take month's to get the credit up for qualifying.

To make matters more complicated not all lenders are equal (as my horror story states). I work with buyers who have gotten bad information before meeting me and it only compounds the problem.

All I can say is that financing is 90% of the equation and is the most important aspect of home-buying. Take it seriously and NEVER think you are applying too early. There is nothing wrong with a loan officer telling you that everything looks good and you will get pre-approved when you are ready to buy!
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Thomas Simon…, Agent, Edina, MN
Thu Feb 21, 2013
Six months on the job is the standard. Be prepared to write a lot of explanation letters. That you are relocating is a plus. You could talk to a local mortgage banker now and have them help you lay out a step by step game plan. Tom
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Lenny Frolov, Agent, Brooklyn Park, MN
Thu Feb 21, 2013
Speak with a loan officer, depending on how your unemployment looks you may need to establish some job history before you can even get the loan.
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Ben Johnson, Agent, Wayzata, MN
Thu Feb 21, 2013
No need to wait to apply. You'll need a couple weeks to a month of pay stubs to get a loan funded but applying right away doesn't hurt. Here's a great lender reference:

Nate Raich
Envoy Mortgage

The terms of FHA financing are changing for the worse in June 2013 so best to act now if FHA is your best bet. Nate can help you explore, I'm happy to answer in more detail as well at 612.812.1146.
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Ron Jensrud, Agent, Bloomington, MN
Thu Feb 21, 2013
It's best to speak with a lender about that. I wouldn't consider an FHA loan at the moment. Too Expensive. Look for a Conventional with minimum down.
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