Gloucester County, NJ First Time Home Buyer Series: Get Pre-Approved!
The first and most important part of being a first time home buyer is to get your ducks in order from the beginning, and that is by getting pre-approved before doing anything else. Getting a knowledgeable loan officer to pre-approve you shouldn't take long. The initial conversation only takes about 10 - 15 minutes. Expect your loan officer to take 24-48 hours to complete a pre-approval. Some situations require (literally) hours of a loan officer's time to complete a pre-approval.
It is important that you are clear, honest, and don't hide anything regarding your income, assets, credit, or anything else regarding your finances. Keep in mind that the loan officer is your friend. Your loan officer does not ultimately approve your loan and offer a commitment to lend you the money. An underwriter does that. The loan officer is there to help you structure your loan; To create the best financing for your situation, to make you aware of your options, and to help you navigate together to settlement.
Be forewarned: Going onto a website and plugging in your income, assets, and some other minor info is NOT the same as having a conversation with a knowledgeable loan officer. Completing a form like this on the Internet may be what some consider a pre-qualification. This is typically a worthless analysis and has only very minor helpfulness for you in determining your potential approval.
A pre-approval will help you with;
- Knowing what you can afford/estimated payments
- Knowing how much money you will need to complete the transaction
- What terms you should negotiate when making an offer on a home
- What time frame you will need to consider as some loan options take longer to complete
A pre-approval should't cost you anything upfront. However, expect to start paying fees once your loan has to be processed.
Your initial mortgage pre-approval conversation will cover your income, assets, credit, work history, and of course what you are looking to accomplish as a first time home buyer. Once you speak with your lender you should start to gather the necessary documentation needed for your approval. A loan officer may issue you a pre-approval without reviewing your documents, however you run the risk of wasting time and money if anything different or out of the ordinary comes up after a review of the supporting documentation.
Basic documents needed
- Pay stubs for the last 30 days
- Asset statements for the last 2 months (Checking, savings, retirement accounts, etc.)
- W2's for the last 2 years
- Photo I.D.
Other documents that may be needed:
- Tax returns (personal / business)
- Divorce/Child Support/Alimony documentation
- Letter(s) of explanation regarding derogatory items on your credit
- Loan specific mortgage documents
- Profit and loss statement(s)
- Collection/judgment payoffs/verification
- Other forms for verification of data pertinent to your approval
Documents needed once you find a home and an offer is accepted
- Signed mortgage application
- Signed agreement of sale (by both parties)
- Appraisal fee ($300-400, varies by appraisal type)
- Pest Inspection, well certification, septic tests, and other supporting documents
- Other documentation on the home and/or your personal finances
Your pre-approval should be updated once a home is found that you would like to put an offer in on. Keep in mind that credit reports are only valid for about 120 days. If it takes you a few months to find a home, your credit will need to be pulled again to allow it to be valid through the settlement date. Therefore, be very careful to do everything possible to keep your credit score as high as possible. A good loan officer will give you sound advice on credit scoring, but BE SURE to know the rules for yourself. This can not be overstated.
Lastly, a pre-approval is based on a monthly payment, not just a purchase price. So a cheaper home with higher taxes doesn't guarantee that you will qualify. This will have to be reviewed by your loan officer, so keep in constant contact with your loan officer to ensure your success.
Be sure to visit the next installment in the Gloucester County, NJ First Time Home Buyer Series.