We take great pride in making your mortgage process as smooth and easy as possible. At the same time, if you’re trying to buy a new home or refinance, you know it’s not as easy as, say, ordering ice cream. There’s a lot that goes into financing a home.
Home financing involves what’s probably one of the biggest transactions you’ll make in your lifetime, and it can definitely be a bit complex at times. Not to worry, though! We can take a lesson from the Boy Scouts: Things are always easier if you’re prepared.
If you’re looking for a mortgage, one of the first conversations you’ll probably have early in the process is with a Home Loan Expert. Here are five key questions to ask so that you can be as ready as possible to move forward.
What Can I Expect?
You should first get an overview from your mortgage lender’s Home Loan Expert on how the whole process works. When you’re looking to get a mortgage, many of the elements of the process are the same:
- While speaking with the Home Loan Expert, you’ll go over your goals for the mortgage, whether you’re looking to buy a new home or lower your current mortgage payment.
- Your credit is pulled to see what you qualify for.
- We gather documentation on your income and assets.
- The loan is underwritten. In this step, your income and asset documentation is verified. We also have an appraiser look at the current value of the home.
- Your loan closing takes place. This is where we cross the T’s, dot the I’s and sign the paperwork.
We even have a short video going over how all this works. However, keep in mind that everyone’s mortgage process is unique, so you should make sure to speak with your Home Loan Expert to go over what to expect ahead of time.
How Strong Is Your Mortgage Approval?
When you go shopping for a home, it’s natural to want to know exactly how much you can afford. Any mortgage lender will give you a letter that says exactly how much you’re approved to offer. (Some lenders call this preapproval.)
Unfortunately, not all approval letters are created equal. Knowing just how strong your approval is can help give both you and the seller you’re trying to impress confidence during the offer process. Your lender should be clear about exactly what you’re getting.
In order to make the process clearer here at Quicken Loans, Power Buying Process™, which has three levels of approval.
A Prequalified Approval is the simplest form of approval letter you can get. A lender pulls your credit. This gives the lender an idea of your monthly debt payments for anything reporting on your credit. This is typically everything from revolving debt like credit cards to the things paid on installment such as student loans, auto loans, personal loans, and of course your future mortgage payment. The lender also receives your median FICO score for qualification purposes.
In a Prequalified Approval, lenders then ask you for verbal (unverified) estimates regarding your income and any assets you want to use toward qualification for the mortgage.
Your monthly debts are compared with your stated income to help the lender determine your debt-to-income (DTI) ratio. Mortgage investors want to make sure you have enough play in your budget not to be spending everything on your debts, so there are guidelines in place. The requirements for every loan are different, but a DTI ratio of around 43% after your mortgage payment is added is a good measuring stick.
Because your income and assets are unverified in a Prequalified Approval, this can provide a good estimate for you of how much you can afford, but an estimate is all it is. Sellers will be treated as such and may choose to put your offer below that of another buyer who has had their income and assets physically looked at during the approval process.
For this reason, we strongly recommend all of our clients move forward with a Verified Approval.
A Verified Approval uses the same qualification factors as a Prequalified Approval and your credit is pulled the same way. The only difference is that you share your income and assets statements with us so that both your income and assets can be validated by our team.
One of the big sticking points for sellers is the importance of making sure the deal goes through. Getting a Verified Approval gives your offer a level of strength on par with that of a cash buyer because the seller knows we’ve checked it out and you can afford what you’re offering.
We’re so confident in our Verified Approvals that we are putting our money where our mouth is. If your loan doesn’t close through no fault of your own after our review, we’ll give you $1,000.1
Having rock solid confidence that you can afford a home is great, but it’s just one concern a home buyer may have. For one of the others, we recommend taking things a level further with a RateShield™ Approval.2
Available on 30-year conventional, FHA and VA fixed loan products, a RateShield Approval lets you lock in your interest rate for 90 days while you shop. Other lenders require that you have a property address before locking your rate. But it gets even better.
As long as you send in your signed the purchase agreement within that 90-day period, if rates have dropped during that time, we’ll give you the lower interest rate to remain locked at while you wait for your closing date. If rates have gone up, you just keep the rate you initially locked. It’s a win-win.
It also protects your monthly payment because you’re always making sure you get the lower rate.
What Paperwork Do I Need?
Next, you should go over what documentation you’ll need to provide to move the process forward. When you start the paperwork for a mortgage, lenders are typically going to ask for the following from you:
- Two years of W-2s
- Two recent pay stubs
- Two recent bank statements
It’s also extremely helpful to have tax returns available, particularly if you’re self-employed.
These are just guidelines, though, as there may be specific documentation that’s necessary for your specific loan. For example, VA loans require a certificate of eligibility from the VA. Ask your Home Loan Expert as soon as possible what documentation will be required so that you can make sure you have everything you need.
When Will I Close?
We pride ourselves on the efficiency of our process and try to get you closed as quickly as is humanly (and legally) possible. That said, depending on the loan program, different requirements and appraiser schedules can slow things down just a bit.
Ask your Home Loan Expert about what they think is a reasonable timeframe to schedule your closing so that we can set up an appointment that works for you.
How Often Will I Get Updates?
As mentioned above, the mortgage process isn’t like ordering ice cream – it takes weeks, not minutes.
Even if you turn in all your paperwork in a timely manner, there are a lot of moving parts to the process. There’s the appraisal, setting up title insurance and lots of other details to take care of.
It can take time, but the process is a little smoother with effective communication. Ask your Home Loan Expert how often you can expect updates as the process moves forward.
How Can I Avoid Delays?
With a transaction as big as a mortgage, there are certain things you want to avoid doing.
Common mistakes include applying for other financing (such as for a new car) at the same time you’re trying to buy a house. This can drop your credit score. Additionally, any large deposits you make have to be sourced, which can cause issues at times.
The best way to handle this is to ask your Home Loan Expert before making any big purchases or changes. They’ll be able to guide you in the direction that makes sense for your loan and situation.
Now that you know what to talk about, perhaps you’re ready to get started. You can get going online or call (800) 785-4788.
1 Participation in the Verified Approval program is based on an underwriter’s comprehensive analysis of your credit, income, employment status, debt, property, insurance, appraisal and a satisfactory title report/search. If new information materially changes the underwriting decision resulting in a denial of your credit request, if the loan fails to close for a reason outside of Quicken Loans’ control, or if you no longer want to proceed with the loan, your participation in the program will be discontinued. If your eligibility in the program does not change and your mortgage loan does not close, you will receive $1,000. This offer does not apply to new purchase loans submitted to Quicken Loans through a mortgage broker. Additional conditions or exclusions may apply. Verified Approval within 24 hours of receipt of all requested documentation.
2 RateShield Approval locks your client’s initial interest rate for up to 90 days on 30-year conventional, FHA and VA fixed-rate purchase loan products. Your client’s exact interest rate will depend on the date they lock their rate. Once your client submits their signed purchase agreement, we’ll compare their rate to our published rates for that date and re-lock their interest rate at the lower of the two rates for an additional 40 to 60 days. Additional conditions or exclusions may apply.
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