So you’re at the point in the home buying process where your loan officer is ready to pre-approve you. This is a very exciting time in your life! Mortgage pre-approval takes you one step closer to owning the home of your dreams.
The first step: you walk into the bank, and your loan officer pulls your credit. They’re going to pull a tri-merge credit report, a merged report from all three bureaus together. Your loan officer will then throw out the highest and the lowest scores and use the middle of the three scores to underwrite your home mortgage pre-approval loan.
In addition to your credit reports, they will look at your tax returns, W-2’s, and pay stubs. Once that has all been completed, your loan officer will begin the process of submitting your loan for approval.
The Do’s and Don’ts of Mortgage Pre-Approval
Let’s talk about a few of the do’s and the don’ts in the industry that can help your approval process go as smoothly as possible.
Do make sure that you’re prepared.
The loan process isn’t as easy as it once was; sometimes an underwriter is going to need more information, such as a letter of explanation or a bank statement, especially if you will be paying with cash.
If you are bringing in cash, you will need to show where that cash is coming from. For example, they are going to source and season your down payment, which helps the bank understand where that down payment came from. We want to source it, and we want to be able to see it somewhere, like a bank account.
Documentation is very important in the loan industry. By being prepared, you can do your part to make sure your approval process goes forward without any hiccups.
Do pay everything off that you can.
The less debt you have going into the home buying process, the better. Paying off credit cards will positively affect your credit score by decreasing your balance-to-limit ratio and will give you more money in the future to put toward your home.
Do listen to your loan officer.
Your loan officer is working hard to get you pre-approved. They want to see you succeed! Listen to your loan officer; they have your best interest at heart.
Don’t apply for new credit while you’re in the pre-approval process.
Applying for new credit can negatively affect your credit, which you want to avoid during this process.
Don’t increase your credit card balances.
Our advice for our customers is to stop using your credit card from the time the banker has said you’re approved and when the loan is closed. If you have to, take them out of your wallet or purse. Do not close your credit cards; you just don’t want to see increases in usage.
Don’t go to 10 or 12 different banks to compete.
Most bankers today do not offer a huge difference between their pricing and products. It’s important to build a relationship with one that you really like. This is the largest thing you’re probably ever going to buy, and it helps to have a loan officer you know and trust.
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