Pre-approval for first time home buyers.


The Difference Between A Qualification And Approval

If you are a first-time home buyer, the first thing that you need to know is that there is a difference between a qualification and an approval. A pre-approval is much more valuable compared to a qualification when you are shopping for a new home. A mortgage pre-qualification is useful as an estimate, but that’s all it is – an estimate. It won’t help you whatsoever when it comes to purchasing a home. A pre-approval is more definite. This means that your mortgage lender has checked your credit and verified documentation to approve a certain amount. Usually, this pre-approval can last for 60-90 days or so and you will not get a final loan approval until after you have an appraisal done and the loan is actually applied to a property on the day of a sale.

Research Mortgage Lenders First

Before you jump into bed with a mortgage lender (seriously – it’s THAT important), do your research to ensure that you are making a great decision because not all are created equal. When you start looking, you first need to consider all of the different types of home lenders. From credit unions to mortgage bankers, correspondent lenders, savings and loans, and mutual savings banks, there are a number of options. Weigh each one and figure out what is right for you. For example, credit unions are member-owned financial institutions that typically have favorable interest rates to shareholders while mortgage bankers work for a specific financial institution and package loans by the bank-s underwriters. Once you figure all of that out, ask around to find out who your friends used. Once you have some names to contact, make sure to ask them all of the right questions such as turnaround times on pre-approvals, what lender fees will you be responsible for at closing, will they waive any fees or roll them into the mortgage, etc.

Work On Boosting Your Credit Score

This actually might be better to do BEFORE you contact a lender, but either way, you need to work on boosting your credit score before you buy a house. It’s so important when it comes to getting a good rate! Most lenders require a FICO score of 620 or higher to approve a conventional loan while FHA guidelines approve borrowers with a score of about 580 or higher with 3.5% down. Of course, this always depends, so check with your mortgage lender!

Gather Together Everything You Need

Your next step in the pre-approval process is to gather all of your documents. This includes (but is not limited to): 

Proof of income – buyers generally must produce W-2 wage statements from the last two years or so, or pay stubs, and additional income such as alimony, bonuses, etc. They might also ask for the two most recent years of tax returns.

Proof of assets – the borrower will need all bank statements, including investment account statements in order to prove that they have the funds for the down payment, closing costs, as well as cash reserves.

Employment verification – lenders want to make sure that they only lend to borrowers with stable employment. A lender may want to contact the previous employer if a buyer recently changed jobs. For self-employed buyers, it’s a bit more challenging. You will need to provide a significant amount of additional paperwork, which is usually related to tax returns. 

Other misc. Items – there will also be other items such as driver’s licenses, SSN, etc.

Get A Good Real Estate Agent

Once you get pre-approved, your next step is to find a reputable real estate agent in the location that you are house hunting in. If you are looking for San Marco real estate, you will want to find an agent that specializes in that area such as Coldwell Banker Vanguard Realty, Erin E. King MBA. Why? Because someone that specializes in the specific area will know how to get you the home you are searching for at the best price, and in the best area of town. Erin King specializes in Jacksonville’s historic neighborhoods, so he can definitely help you out if that’s what you are looking for. He previously worked in financial services and holds an MBA with an economics focus. He loves sharing his wealth of knowledge on all things related to home buying and selling such as where to seek financing, how to price homes (especially in historic districts), and more. Erin has put together a team of contractors and other professionals who help home transactions go smoothly, so when you work with him, you do not have to lift a finger…other than getting all of your paperwork to your lender! 😉

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