PreApproval for a home loan in Colorado is the first step in the home buying process. It is a critical step that is too often skipped by prospective home buyers. Everyone hears about how difficult it can be to get a home loan. and the stories of long drawn out escrow closings and even loan getting declined for buyers in escrow to buy a home are fairly common. The truth is, if a potential home buyer is Pre Approved by a lender prior to making an offer on a home, then there is a much better chance for a fast, smooth closing.
How Difficult is it to get PreApproved for a Home Loan?
It is actually fairly easy to get Pre Approved, depending on the lender you choose. Some lenders will charge a fee, while others will do a free Pre Approval. The typical first step in the in the PreApproval process is the initial consultation with an experienced Colorado Loan Officer. The loan officer should be able to get enough information from the home buyer so that they can provide custom loan scenarios. The custom loan scenarios will have details on the purchase price, loan amount, down payment, payment breakdown including taxes and insurance, closing costs and prepaids, and the total amount needed to close. The initial consultation will help the borrower determine which loan program and deal structure will work best in their situation.
Also, for certain types of loan programs PreApproval is even more important. A Colorado Veteran planning to us a VA home loan to buy a home should get Pre Approved by a California VA loan officer. The loan officer will be able to get the Veterans Certificate of Eligibility as part of the VA Loan Pre Approval. Also, if the Veteran wants to buy a home with no money out of pocket, commonly known as a VA No No, then working with an experienced VA loan officer before making an offer on the home is critical.
What is Needed for Pre Approval?
For home loan Pre Approval the lender will need the following items. Depending on the borrower, the complexity of the loan, type of mortgage loan, there may be more items needed.
- Federal Tax returns for most recent two years, including all schedules. Self employed borrowers also will need to provide their corporate or partnership tax returns and K-1′s if applicable.
- W2′s and/or 1099′s for the most recent two years.
- Pay Stubs for the most recent 30 day time period. For self employed borrowers, a year to date profit & loss will be needed.
- Bank statements, including all pages, for the most recent two month time period. The bank statements will be reviewed for any deposits that are not payroll related. Deposits may need to be verified.
- A completed loan application, also known as the “1003″ (pronounced “ten 0h 3″ if you really want to sound cool to your loan officer).
Once the lender has your documentation and completed loan application, your credit report is pulled and documentation is reviewed. The lender will run the application and credit through an “Automated Underwriting System”, or AUS. The AUS will let the lender know if the loan package if Approved. Even with an AUS approval in hand, the lender needs to carefully review the supplied documentation to make sure the application was completed correctly and that the loan guidelines are being met.
Even after the Pre Approval Letter has been issued it is important to know for the mortgage loan in Colorado that any changes in the borrower's financial position could have an affect on the approval. For example, the buyer should not go out and buy a new car, take on new debt, or make any late payments
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