3 Common Questions Regarding Mortgages and the Home Buying Process
When applying for a mortgage, there are a lot of things to consider, and often a lot of questions that pop up throughout the process. Here are a few answers to some of these common questions regarding mortgages and the home buying process.
Where Can I Find a Great Mortgage Lender?
One way to find a top mortgage lender is by doing some research online. The internet has changed how consumers in general shop for services including mortgages. A simple online search of top mortgage lenders along with your City and State will provide several pages of results to the top mortgage lenders in your area.
Another great way to find a top mortgage lender to get the process started is by asking friends, family members, or colleagues if they had any suggestions for whom to obtain a mortgage from.
Asking an experienced and top producing Realtor in your local area is another great way to find a top mortgage company. Most top Realtors will have connections with several mortgage companies whom they know will provide excellent service.
What is the Difference Between Pre-Qualification and Pre-Approval?
A common mistake that home buyers make is not getting a pre-approval. Many home buyers believe that a pre-qualification is the same as a pre-approval. However, this is actually the furthest from the truth.
A mortgage pre-qualification can easily be defined as an estimation of how much a buyer can borrow. In many cases, a pre-qualification is only as good as the piece of paper that it’s written on. It is fairly common practice that a mortgage lender who pre-qualifies a buyer asks them for information such as income, debts, and other assets without verifying the information. If a buyer is not truthful or makes a mistake when giving the information this can lead to problems in the future when the mortgage is verified by an underwriter.
A mortgage pre-approval is what every home buyer should obtain prior to looking at homes. A mortgage pre-approval can be easily defined as a written commitment for a buyer from a mortgage lender. To obtain a mortgage pre-approval a buyer will be required to provide the same documents that are required when formally applying for a mortgage, such as w-2’s, pay stubs, and bank statements.
There are many reasons why a mortgage pre-approval is better than a mortgage pre-qualification. Three of the most important reasons why a pre-approval is better than a pre-qualification is;
- Helps buyers beat out competition in multiple offer scenario or strong seller’s market
- Gives “peace of mind” to a seller when submitting offer that the mortgage will be approved
What Documentation Do I Need to Apply for a Mortgage?
The documentation that is required to get a mortgage will vary from buyer to buyer. For the most part, however, the documentation that is required to get a mortgage will be fairly similar.
When formally applying for a mortgage, there will be some initial documentation that will be required by the mortgage lender. Generally, this documentation includes a social security card, pay stubs – or proof of employment, and the past two years w-2’s. It should be noted that the documentation will be different for buyers who are self-employed as well.
Other common documentation that is requested by a mortgage lender to obtain a mortgage includes:
- Drivers license
- Bank statements
- Asset statements
- Fully executed purchase contract
- Copy of an earnest money deposit check
It’s important to understand when obtaining a mortgage that there will likely be additional documentation that will be required even after the formal mortgage application is completed. Documentation that is commonly asked for after a mortgage application is completed can include:
- Updated pay stubs
- Updated bank statements
- Verification of employment
- Gift letter for down payment (if applicable)