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The Pre-Pre-Approval Process For A Mortgage

There are many steps to financing a home. Most people consider the pre-approval process the first step to getting a mortgage. But what can you do before the pre-approval process? The pre-pre-approval process for a mortgage! By completing these steps, you will be ready to obtain a mortgage and be on your way to purchasing a home!

  1. Analyze your credit report.

    By going to annualcreditreport.com, you can receive a free credit report. You are guaranteed one free credit report every year from Equifax, Experian, and TransUnion, the three large credit agencies in the US. The government requires that these credit reporting companies provide you this service upon request. These reports contain information on your finances and living situation. It is essential that you look through your credit report. A credit report determines your ability to be accepted for a mortgage.

  2. Have problems investigated.

    If, when analyzing your credit report, you see any red flags, take the time and energy required to have them fixed. A study done by the Federal Trade Commission discovered that 25% of consumers found a problem in their credit report that had the potential to damage their credit score. Eighty percent of those who sought to have the problem fixed were able to have their credit report changed. The credit bureau, by law, has to investigate the problems in your credit report that you bring to their attention. Fixing a problem could be the determiner of whether or not you are approved for a loan.

  3. Gather your paperwork.

    You will need:

    • Two types of government identification: a passport, driver’s license, social security number, birth certificate, or voter registration card.
    • Your tax return documents.
    • Any type of document demonstrating an income. This includes W2’s, child support, pay stubs, Social Security, or any type of other government assistance. If you are self-employed, have your income and expense statement available.
    • Documents proving that you have paid your rent on time if you have previously been renting from a private landlord.
    • Documents demonstrating the amount you have in the stock market.
    • Proof of any other property you may own.
  4. Prepare your cash.

    Have the money that you are going to need for the down payment and closing costs in a bank, ready for you when it is time. A 20% down payment is fairly standard. This amount will give the lender assurance that you are going to pay your mortgage responsibly. It will also enable you to by pass paying private mortgage insurance. If the down payment is less than 20%, the lender requires the buyer to pay for private mortgage insurance in order to cover the risk of the homebuyer being unable to make payments.

  5. Reveal history of financial problems.

    If you have previously had problems with bankruptcy, you are going to need to disclose that information. Your bankruptcy has to be discharged before you can even speak to a lender about a mortgage. You have to be completely through the program or counseling you used to help you stabilize your finances. If you went bankrupt, the quickest way to try to help your credit score is through a secured credit card and an installment loan. Through both of these methods, you can regain a lenders trust. The secured credit card limits your credit limit to the amount you have on deposit. The installment loan forces you to make a monthly payment for a specific loan. Both will help the lender know that you are going to be responsible with your finances.

  6. Maintain a good credit score.

    If you currently have a good credit score, the last thing you want to do is jeopardize that score. A change for the worse during the application process for a mortgage could cause you to not qualify for a loan. Therefore, decisions you do not want to make during this time include:

    • Making a large purchase
    • Accumulating more debt
    • Canceling current or applying for new credit accounts
    • Having your limit lowered

If you complete each of these 6 steps, you are ready to go through the pre-approval process. Once you are successfully pre-approved, you will receive a Good Faith Estimate (GFE). The GFE contains information on: interest rates, loan amounts, loan options, escrow, and settlement charges. Don’t be satisfied with just one GFE. Go to multiple lenders to receive multiple GFEs. Lenders have different fees and programs available. After the amount of time you have invested in the pre-pre-approval and pre-approval process, don’t settle on the first lender you work with.

Contact Paul Chunyk

Reach out to me, I would love to give you more details and get you headed in the right direction to accomplish your goals.

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