Construction Loan Pre Approval Calculator – When looking for a home, getting pre-approved for a mortgage can be an important step. Obtaining a consultation and pre-approval letter with the lender gives you the opportunity to discuss loan options and budget with the lender; This step can be used to clarify your overall house hunting budget and the monthly mortgage payment you can afford.
As a borrower, it’s important to know what a mortgage preapproval does (and doesn’t) and how you can increase your chances of getting one.
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Think of a mortgage pre-approval as a physical test of your finances. Lenders poke holes in every nook and cranny of your financial life as you try to make sure you pay off your debt.
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You may have heard the term “pre-qualification” used interchangeably with pre-approval, but they are not the same. With pre-qualification, you provide a mortgage lender with an overview of your finances, income and credit. The mortgage lender will then give you an estimated loan amount.
In this way, mortgage pre-qualification can be useful as an estimate of how much you can afford to spend on a home. However, the lender does not pull credit reports or verify your financial information. As such, pre-qualification is a useful starting point for determining what you can offer, but it carries no weight in the offer.
Pre-approval, on the other hand, involves filling out a loan application and providing your Social Security number so the lender can do a serious credit check. When you apply for a mortgage, a serious credit check is performed. For this process, a lender takes your credit report and credit score to assess your creditworthiness before deciding to grant you a loan. These checks are recorded on your credit report and can affect your credit score.
In contrast, a soft credit check is when you pull your credit yourself or pre-authorize it without the credit card company or lender asking you for it. Soft credit checks do not affect your credit score.
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Also, they list your bank account details, assets, loans, income, work history, past addresses and other important details to verify the lender. Because, above all else, the lender wants to make sure you can pay off your loan. Lenders use the information provided to calculate your DTI ratio and LTV ratio, which are important in determining an interest rate and appropriate loan type.
All these pre-approvals are more valuable than pre-qualifications. This means that the lender has verified your credit and verified your documents to approve a particular loan amount. Final loan approval occurs when an appraisal is done and the loan application is made for the property.
Mortgage pre-approval letters usually last 60 to 90 days. Lenders put an expiration date on these letters because your financial and credit profile may change. When the pre-approval period ends, you’ll need to fill out a new mortgage application and submit updated documents to get another one.
If you’re just starting to think about buying a home and suspect you might have a problem getting a loan, going through the pre-approval process can help you identify credit problems and give you time to resolve them.
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Getting pre-approved six months to a year before a serious home search puts you in a strong position to improve your overall credit profile. You’ll have more time to save money for the down payment and closing costs.
When you’re ready to make an offer, a seller will usually want to see a mortgage pre-approval and, in some cases, proof of financing to show you’re a serious buyer. In many hot housing markets, sellers have an advantage due to high buyer demand and limited homes for sale; They may be less likely to consider offers without pre-approval letters.
Applying for a mortgage can be exciting, nerve-racking and confusing. Some online lenders will pre-approve you within hours, while other lenders may take days. The timeline depends on the lender and the complexity of your finances.
For starters, you fill out a mortgage application. They will collect your identifying information as well as your social security number so the lender can get your loan. Although mortgage credit checks are considered a serious test of your credit report — and can affect your credit score — if you shop around multiple lenders in a short period of time (typically 45 days for the new FICO score models), combined credit checks are. Considered as a single test.
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Here is a sample of a uniform mortgage application. If you’re applying with a spouse or other borrower to qualify for a mortgage, both applicants must list financial and employment information. There are eight main parts of a mortgage application.
Such as the specific loan product you are applying for, loan amount, terms, loan repayment period (instrument) and interest rate.
Address: Legal description of property; Year Built: The loan is for purchase, refinancing or new construction; and desired type of residence: primary, secondary or investment.
Your identifying information, including full name, date of birth, social security number, years of education, marital status, number of dependents and address history.
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Names and contact information of current and previous employers (if you have worked at your current job for less than two years), dates of employment, occupation and monthly income.
A list of your basic monthly income as well as other types of monthly income, such as overtime, bonuses, commissions, net rental income (if applicable), dividends or interest, and child support or alimony.
Also, you’ll want to keep track of your combined monthly housing expenses, including rent or mortgage payments, homeowner’s and mortgage insurance, property taxes, and homeowner’s association fees.
A list of all bank and credit union checking and savings accounts with current balances as well as life insurance, stocks, bonds, retirement savings, and mutual fund accounts and associated values. In addition to cash reserves, you’ll need bank statements and investment account statements to make sure you have money for the down payment and closing costs.
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You’ll also need to list all your debts, including checking accounts, alimony, child support, car loans, student loans, and other debts.
Overview of key transaction details including purchase price, loan amount, cost of improvements/repairs, estimated closing costs, buyer’s rebate and mortgage insurance (if applicable). (The lender fills in a lot of information.)
Accumulation of any judgments, claims, past losses or claims, pending lawsuits or delinquencies. You will also be asked to state whether you are a US citizen or permanent resident and whether you intend to use the home as your primary residence.
Most home sellers will be more willing to negotiate with those who have proof that they can get financing.
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A lender is required by law to provide you with a three-page document within three business days of receiving your mortgage application. This document shows whether the mortgage is pre-approved and the loan amount, terms and type, interest rate, estimated interest and fees, estimated closing costs (including any lender’s fees), property taxes and homeowner’s insurance, and any special loan features (such as as balloon payments or advance payments). It also sets maximum loan amounts based on your financial picture to help you narrow down your mortgage budget.
If you are pre-approved for a mortgage, your credit file will eventually be sent to the lender, who will verify your documents with your mortgage application. The underwriter ensures that you meet the borrower’s guidelines for the particular loan program you are applying for.
After submitting your mortgage application, you will need to collect some documents to verify your information. Preparation and organization on your part will help the process go more smoothly. Here is a list of documents you must provide to get pre-approved or final loan approval before closing:
Many loan products allow borrowers to use cash gifts from relatives for a down payment. If you go this route, the lender will require you and the gift giver to complete a formal gift deed stating that the gift is not a third-party debt payment.
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Otherwise, such an arrangement will increase your DTI rate and affect your final loan approval. Additionally, you and the contributor must provide bank statements to transfer funds from one account to another.
If you want to increase your chances of getting a mortgage pre-approval, you need to know what factors lenders evaluate in your financial profile. They include:
Your DTI ratio measures all of your monthly debt against your monthly income. Lenders combine debts like car loans, student loans, revolving accounts and other lines of credit with the new mortgage payment and divide the total amount by your gross monthly income to get a percentage.
Depending on the loan type, borrowers must have a DTI ratio of 43% (or less) of their gross monthly income to qualify for a mortgage. The higher your DTI ratio, the higher your risk
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