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When you begin the process of looking for a new home, you should think early on about the loan approval process and take steps to get started. It’s a fairly standard, but multi-step process and it’s important to understand it.
The first step is to get what’s called a pre-approval letter. It is just that—an essential indicator of your ability to get a loan prior to the in-depth actual loan approval process. It’s important for a couple of reasons. First, it can help you set your price range so you know what homes you can afford and what your potential payments might be. Second, you’ll need a pre-approval letter to submit with any offer you write on a home. This important letter gives the seller critical reassurance that you are financially well equipped to purchase the home.
What do you need to get a pre-approval letter? Typically, you’ll need to fill out an application, often online, outlining such information as employment and salary, investment and bank account balances, and details of other assets. You’ll also outline liabilities. And the lender will ask for your social security number to pull your credit rating.
The Locate Team has several lenders with whom they do business every day and can recommend one of those if needed.
Loan Approval Process
Once an offer is accepted and you are under contract for a home, the actual loan approval process begins. The lender will need documentation of various financial information from you. Here’s a recap:
- Proof of employment and income. You’ll want to prove that you are gainfully employed and earning a salary that will make lenders comfortable with granting you a loan.
- Proof of assets. As a borrower, the lender will require bank statements and investment account statements to prove that you have funds for a down payment and closing costs.
- Good credit. Most lenders will require a credit score of 620 or higher for a conventional loan. The higher the credit score, the lower the interest rate.
- Other miscellaneous documentation. You’ll need to provide a copy of your driver’s license and social security number for your lender. This allows the lender to pull your credit report.
Once the lender receives the needed documentation, your application will be complete and the lender sets out to verify all information provided. As the closing date nears, be mindful of your lender’s right to check your credit and verify your employment one more time after receiving the “clear to close” status. Alert your lender to any career changes that may coincide with the transaction. And most lenders suggest you do not take out any other loans (car loan, etc.) or make any major purchases that could affect your credit balances or cash position during this timeframe.
The final step is closing. Once all of the conditions of the approval are met, you will receive instructions for your mortgage and the loan itself.
Consider the benefits of Compass Bridge Loan Services
If you’re juggling the delicate process of purchasing a new home while attempting to sell your current one, it may be beneficial for you to investigate Compass Bridge Loan Services
. A bridge loan can work in the buyer’s favor, allowing you to use equity from your current home as you make an offer on your next home. This short-term loan allows you some flexibility, as you don’t need to rush into selling before you’re ready. With the Bridge Loan Advantage, the Locate Team will work with you to sell your current home and up to six months of your bridge loan payments and associated costs will be fronted.
Are you interested in knowing more?
If you are interested in buying a new home or selling your current home, contact the Kansas City Realtors at the Locate Team
. They will be happy to answer your questions and help you find the home of your dreams.