The most important step in getting Pre Approved for a home loan is knowing your debt to income ratio. Your credit will need to be pulled by your lender to determine your debt to income ratio. Your debt to income ratios will determine how much of a mortgage loan you’ll qualify to obtain. Depending on your lender, you’ll know your results the same day and receive a Pre Approval Letter.
1. The BEST credit score for financing is 640 & up.
2. Typical Downpayment for Financing is 3% – 3.5%.
3. Two Most recent Bank Statements, Current Pay stub, W-2 forms, last two years.
4. Must be employed for at least 1 year (or in the same line of work if you’ve changed jobs within a year). Job must be in the same state your buying a home. If self employed, your tax returns need to confirm self employment for the last 2 yrs.
5. Last 2 years Filed Tax Returns.
6. Any B/K must be minimum 1 year from discharge for FHA mortgages.
7. Any prior foreclosure must be 1 year from when the previous bank sold the property, assuming your credit has been re established.
8. Documentation of the source of your down payment: investment or savings account statements showing at least two months’ history of ownership. If some of the funds were a gift, get a signed statement from the giver stating that the funds were a gift.
9. Documentation of name change, if recent
10. Proof of your identity (typically a drivers’ license or non-driver ID)
11. Social security number
12. Certificate of housing counseling or home buyer education, if you have one
Service members or veterans should obtain a certificate of eligibility from the VA.
NOTE: A Pre Approval Letter is simply an analysis of your credit worthiness & contingent upon verification of other documentation including but not limited to: proof of employment, income, filed tax return verification, rental history verification & a final underwriting review from your lender.
A Proof of Funds letter is required from your bank if your paying cash to confirm your cash assets.
A Pre Approval Letter is a letter from your lender to confirm the loan amount and financing.
Contact us directly for commercial financing recommendations.
1. Payment History (impacts 35% of your credit score)
Payment history accounts for how you have paid your bills in the past, what the balances are on your credit accounts, what type of credit you have & how many late payments have occurred.
2. Balances owed on your account (impacts 30% of your credit score)
Using more than 30% of your available balance lowers your score. For example, if your credit card limit is $1000, the debt on the card shouldn’t be more than $300 in an effort to keep your credit score from being negatively affected.
3. Length of credit history (impacts 15% of your credit score)
The longer you have accounts open the better.
4. New Credit (impacts 10% of your credit score)
5. Mix of Credit (impacts 10% of your credit score)
Mix credit are the types of diverse credit you have. Installment credit v/s revolving credit.
An example of installment credit is a mortgage or student loan. An example of revolving credit is credit cards.
This information can surely make an impact on whether you are pre approved for a loan.
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Once you decide to become a customer of Diamond Realty Brokers, we will guide you throughout the Pre Approval process.
The first step to home ownership is getting pre-approved before you shop for home. This will help determine a target price range that is suitable for you. If the property is priced very well, you should expect the property to go under contract within days from being listed. Once your pre approved, we then schedule property showings.
Most home loans (except VA loans) require a downpayment on the purchase of homes. Note: VA buyers still have to get pre approved for a loan. VA doesn’t directly provide home loans.
For example, if the purchase price of your home is $400,000 multiply by 3.0% (the estimated interest rate) which equals $12,000 downpayment.
The downpayment does not include closing cost. The downpayment is the amount required from you by your lender, in an effort for them to fund the balance.
The closing cost are fees charged by the lender to you, in order to package & close your loan. Although the seller often assist in helping buyers pay a percentage of their closing cost, it is not a requirement of the seller. Your lender can give you an estimate of your closing cost prior to closing.
Buyer Frequently Asked Questions
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Download Your Home Loan Tool Kit – Consumer Protection Bureau
