Once you’ve found a Realtor to represent and advise you on what is likely to be the biggest financial transaction you make, the next step is to get pre-approved by a mortgage lender. There is no way to be competitive in this market without having loan pre-approval. Also, it’s important that you have an understanding of how much you can comfortably afford to spend on a home, what your monthly payments will be, what interest rate you qualify for, and how much you’ll be paying each month in taxes, etc. Here’s a great website to help demystify the mortgage process .
Having a good mortgage lender is a crucial part of ensuring a smooth transaction. A good lender is a huge asset as a resource and someone that is working to get you the best product for your situation. It really is important to work with the best! We can highly recommend:
Stephen Griffin | Guaranteed Rate | Direct (303) 557-3846 | Cell (303) 883-9361 | email@example.com | Loan Application: http://www.rate.com/stephengriffin
Shannon Daffer | Westerra Credit Union | Direct (303) 991-1654 | Cell (720) 985-7456 | firstname.lastname@example.org
Mark Steinke | US Bank | Direct (720) 842-4124 | email@example.com
Paperwork You Need To Gather
Each lender has slightly different requirements regarding what documentation they need from you for the preapproval process, but in general, expect to provide the following items:
- A completed application. The lender will provide this to you directly
- The two most recent months (or a quarterly statement) of any asset information listed on the application. Generally the lender needs checking, savings, 401k, mutual funds, individual stock accounts, IRA’s, brokerage accounts, etc…..
- Past two pay stubs if you are a W2 employee
- Past two year’s worth of US Tax Returns (ie. 2020 and 2021 Federal Tax Returns)
- Past two year’s worth of Corporate Tax Returns (if self-employed and you own over 25% of the company)
Getting a Pre-Approval Letter
Once you submit the above items and anything else they may require, you should receive a pre-approval letter within a few business days. In addition to receiving a pre-approval letter which shows the amount the lender feels you can comfortably afford, you should know what the amount translates to in terms of monthly mortgage payment, any PMI, taxes, and insurance. That way you can make sure you are comfortable with what your monthly housing payment will be at the pre-approval letter loan amount.
Get a Loan Estimate and Understand Your Closing Costs
In addition, mortgage lenders are required to provide you with a Loan Estimate (LE) within 3 days of receiving your pre-approval. The LE provides an estimate of the closing costs you’ll need on top of your down payment and shows exactly what fees the mortgage lender is charging you. Make sure you understand these fees. Generally, we estimate closing costs to be approximately 2% of the purchase price of the property. Here is an article discussing closing costs in Colorado Your mortgage lender can provide you with a more detailed estimate based on your exact pre-approval price. Remember, these closing costs are due at closing (except for the appraisal and inspection fees which are due on the day those services occur) and are on top of your down payment.
Should You Shop Your Loan Around?
In our opinion it is crucial you shop your loan around to at least two lenders. Every lender charges different fees and different interest rates. Each lender will need to pull your credit report in order to give you an accurate pre-approval letter, it is best to try and do this in the same 24-48 hour period. If your credit is pulled by various lenders on the same day or within a day of each other it will have less impact on your credit score than if you have it pulled by various lenders weeks apart. Also, if you’re going to compare interest rates, make sure you are comparing interest rates between lenders on the same day as rates vary, even over the course of the day.
Questions about the preapproval process? Just call us at 303-667-9442.