Home Buying Guide Step 1: Pre-Approval
The Pre-Approval process is one of the most important steps towards your home purchase.
Preparing for the Pre-Approval Process
Determining your financing options is a significant step towards your home purchase. Your lender through the purchase process will ask for a lot of information as you work towards closing on a home.
Some of the information a lender may ask for include:
• Bank Accounts: Name of bank, address, account numbers, types of accounts, and present balances. With checking, use average balances.
• Copy of two most recent statements of all accounts.
• Stocks and Bonds: Copy of certificates or copy of recent (within 30 days) broker statement listing the holdings.
• Life Insurance: Cash value, only if being used for down payment.
• Vehicles: Year, make, and value. Copy of title if under 4 years old with no outstanding lien.
• Real Estate: Address and market value. If free and clear, deed of release, deed or mortgage payoff.
• Present Home: Copy of sales contract, settlement sheet and/or lease.
• Gift Letter: Form will be provided by financial representative. Donor Capacity must be verified. Receipt of funds must be shown in account.
• Credit Cards: Account numbers and outstanding balances.
• Loans (Auto, Mortgage, Personal, Student, etc.): Name of institution, address, account numbers, outstanding balances, monthly payments, months left on loan. Copy of next payment coupon. 12 months’ statements or canceled checks for present mortgage.
• Alimony and Child Support: Copy of Ratified Decree and property settlement setting out terms.
• Certificate of Eligibility: To obtain certificate, you will need a DD-214 (Separation of Service) or if in the Service, you will need a Statement of Service signed by Commanding Officer of Personnel Officer (certificate must be updated prior to application).
• If in service, you will need Authorization to Live Off Base (DD-1717 from Housing Office) and Transfer Orders (if applicable).
Which Loan is Right For You?
There are a variety of mortgage loan options available. There is no one site fits all mortgage. The mortgage that is right for you depends on a variety of financial factors. Your lender is in the best position during the purchase process to help you determine which mortgage product will work for you. There are many types of mortgage loans:
Jumbo loans, and more.
Each loan may have certain requirements based on down payment, DTI (Debt to Income Ratio), mortgage insurance, and interest rates.
Click Here for more information on the different types of loan products available
How to pick the right lender
The selection of a lender is one of the most important decisions that you will make during the buying process. Your relationship with your lender can make or break a transaction. Some things to consider when picking a lender:
Does the lender educate you on the process of purchasing a home?
How does your lender prefer to communicate with clients — email, text, phone calls or in person? How quickly do they respond to messages? If that style classes with how you communicate the lender may not be a good fit.
Is the lender available to run timely cost estimates for homes of interest? Great lenders when asked will provide estimates on a home’s monthly payment as well as estimates on cash to close provided they are given the homes purchase price, taxes, any HOA fees, and estimated home insurance costs.
How long is the lenders turnaround times on pre-approval, appraisal and closing? Are closing generally on time?
What lender fees will I be responsible for at closing? (Fees may include commission, loan origination, points, appraisal, credit report and application fees.)
What are the down payment requirements for the programs I would likely be pre-approved for?
Will the lender be in close contact with your agents during the process?
Will they be the main point of contact or will it be another individual?
How much can I afford? Your monthly payment
Many times buyers are concerned with the overall purchase price of a home. Many will use this number to determine which homes will work for their budget. While the purchase price is an important aspect of the home focusing on it exclusively can eliminate homes that may fit your budget.
Lenders and agents generally recommend focusing instead on what your estimated monthly payment will be. In general, the monthly payment is what a buyer is comfortable handling each month.
Your mortgage payment per month will take into account:
Principal and interest payments
Mortgage Insurance (PMI if any)
The Home’s Taxes
Any HOA (Home Owners Association) fees
CDD Fees (if any)
Monthly Home Insurance Estimates
When combined together these items will help you determine what your monthly costs will be and if the particular home could work financially. There are instances where a $300,0000 home low taxes and low HOA fees could be cheaper per month than a home $250,000 home with high taxes and high monthly HOA fees.
We work with our customer’s lenders to run estimates to see where each particular home sits with regard to your estimated monthly costs.