Preapproval Letter

Lender Referrals

Loan Types

Before you can offer on a home we need a letter from a Lender stating that you are an approved borrower.  Without this letter, sellers will not even look at an offer from you.  This letter gives you a budget for your home search.  

What is needed to get a preapproval?

  • 2 Years of Tax Returns

  • 2 Months of Bank Statements

  • 2 Months of Pay Stubs

  • Credit Report

  • Employment Information 

  • Additional Information Requested from the Lender 

There are different loan types

  • Conventional - This option requires higher credit scores.  Down payment can be 3%, 5% or 20%.  PMI (Mortgage Insurance) is removed with down payments 20% or more.

  • FHA - More flexible credit requirements.  Down Payment at 3.5%.  PMI is included on this loan payment.

  • VA - Loan program for veterans.  Down payment is 0%.

  • New Construction - This loan allows for you to build a home from plan to completion. The payment of your home is paid in multiple draw phases during 7- 12 months construction. Builders must have a portfolio of past builds and a good financial standing with a bank to offer this loan option.  (If a builder only accepts cash this is a red flag.)  Down Payment 3% - 3.5%.

  • Lot Loans - Banks will finance your lot now and build later.

  • Condo - This is a loan program for condos due to the special insurance requirements for properties that are multi-family (share exterior walls with another home.

  • Self Employed - We have lenders that will work with you to provide options based on 2 years of taxes or less than a year of bank statements.  Self employed need more assistance proving your annual income to receive higher loan approval amounts. 

  • Investors - We have lenders to qualify you based on your home equity or investment cash flow.  We also have hard money options and options to use your retirement accounts penalty free.

  • Foreign National - Call for details on financing options

Credit Score 

Different loans have different credit score requirements.  Score and income can determine your down payment amount.  Check out this great chart.

A great lender can run credit scenarios and tell you if you pay off a credit card, have collections removed, transfer a car loan to a spouse how you can boost your credit score.  Call us for even more tricks to improve your approval odds sooner. 

I have about a dozen wonderful local lenders to help you navigate the loan process.  Call or text me with some details about your credit score, preferred down payment and loan type and I'll connect you with lenders that will close on time.

The market rate is just a starting point to determine your interest rate.  The chart above shows all the factors that affect your overall interest rate, which include market rate, loan amount, credit score, down payment, debt ratio and type of home.

You can also buy down your rate.  By paying points at closing your interest rate can be reduced and save you money over the entire loan. 

You pay interest on the loan balance.  So if you make just 1 extra payment a year on the principle loan amount you can shorten your 30 year loan by 5 - 7 years.  So start using those commission bonuses or tax returns to make an extra payment.  You will thank yourself later.

Interest Rate

Credit Changes will Result In Denial

Your Approval can quickly become a Denial by making these mistakes before closing day.

Do NOT do the following:

  • Do Not Apply for a NEW Credit Card

  • Do Not Apply for a NEW Loan for a Car

  • Do Not Max out credit cards or Miss a Payment 

  • Do Not Deposit Large Amounts of Unexplained Income

  • Do Not Apply for Another Home Loan

  • Do Not Get Married

  • Do Not Change Jobs, Become Self Employed, or Quit Your Job

  • Do Not Omit Debts or Liabilities from Loan Application

  • Do Not Cosign for Anyone

  • Do Not Change Bank Accounts

  • Do Not Originate any Other Inquires on Your Credit

  • Do Not Buy Furniture or Apply for Store Account 

  • Do Not Spend Your Money Set Aside for Closing Costs

Closing Costs and Down Payment 

Your Approval & Loan Budget 

Family members or spouses can gift money toward your down payment.  It requires a little extra paperwork but well worth it. 

Another options is asking for closing cost contributions.  In some cases we have saved customers up to $12,000 or more on their closing costs.

When calculating your cash needed for closing day there are 2 parts, your down payment and closing costs. 

Example 

Purchase Price                 $250,000

FHA 3.5% Down                 $8,750

Closing Costs                    $15,000

    (lender fees, insurance, taxes, appraisal fee, title fees)

Closing Cost Credit 6%       -$15,000 (6% or closing costs total)

Pay on Closing Day              $8,750   

Lenders will look at your current expenses and determine if your income minus your debt meets the lender ratio for loan approval. 

 

If your expenses are too high you can work to pay off some of those accounts.  Paying off a credit card is an easy way to improve your ratios.  Trading a high auto loan payment for a lower payment or no payment at all is another option for improving your ratio. 

Another option to for approval is to add a cosigner (parent, spouse, or someone you trust) or remove the spouse with the lesser credit (or higher debt) from application.

How Much Is Your Mortgage Payment

A few factors that can increase your monthly payment

  • Loan Amount gives you the largest portion of your mortgage

  • Loan Interest

  • Insurances are paid monthly into an escrow account 

    • Flood​

    • Home Owners

  • PMI ​

  • Taxes & Assessments 

  • HOA Fees 

If Not Approved Today, Some Day Soon

We will work with you over time to improve your credit or debt ratios to get a loan approval.  Planning a home purchase saves you money and we love that.  We are committed to your success.

© 2023 by Lacey Dickinson