Your Questions About Home Loan Pre-approval

Paul asks…

How do I shop for a home loan?

I want to get pre qualified. But I understand that cost money. Do I call around to the different banks and get the rate and fees they will give me. Then once I find the one I want, I get them to prequalify me? Or do I get prequalified from several banks? Thanks.

John answers:

You do not want to get pre-qualified for a home mortgage, you want to get pre-approved for a home mortgage loan.

Your mortgage loan will be based on your credit score and how you have paid your debts on you credit report. This is pretty much standard, so going to several mortgage lenders and/or banks will not benefit you in any way that much.

You need to get your mortgage broker/banker to explain each and every program you are approved for. This is the only way you will be able to make an intelligent decision about the best possible loan program available to you.

In order to find out the type of loan programs you are qualified for you will have to fill out a loan application, with a mortgage broker, which you can find one in your local telephone book.

Make sure this mortgage broker or mortgage banker is able to do government loans such as FHA and VA loans if you qualify for one.

He will fill out this application, which takes awhile so grab your favorite beverage and sit down. Once you have completed the application, he will run your credit report which will have your credit scores. These credit scores will determine your interest rate.

The amount of your monthly debt payments you are required to pay as per your credit report and the amount of mortgage you can take on based on your income will determine the amount of house you will be able to purchase.

When you speak with the mortgage broker you will need the following documents to complete the loan application, there will be others, but this will get you started.

#1 One month of pay stubs for each person that will be on the mortgage.

#2 Six months bank statements from each bank in which you bank as well as statements from any 401K from you place of employment.

#3 Two years of federal income tax along with the W-2 that match.

Once he has all that he need to do he can then issue you a pre-approval letter so you can purchase a home. In this pre-approval letter will be the amount of house you are qualified to purchased.

Once he gives you this pre-approval you may now find a real estate agent to find yourself a home or he might have a referral.

Now make sure before you get your pre-approval you and your mortgage broker go over all your options as to the mortgage programs you qualify for, the interest rate, monthly payments.

If you are getting a FHA, fixed rate, two loans to eliminate PMI like an 80/20 or one loan, if you are qualified for and approved for a 100% loan.

You should select the loan that best suit your financial condition at the time. That could be an adjustable rate loan. It could be a fixed rate loan for 5 or 10 years and then adjust. Some adjustable rate mortgages only adjust once.

Make sure your mortgage broker explain all your options so you may make an intelligent decision.

What might be good for one person might not be good for you, in other words just because your friends and all your real estate buddies are telling you about the great fixed rate they got, your financial situation might call for something else.

So select the best option for you and your financial situation.

You should also get a Good Faith Estimate (GFE) which will indicate the cost you will have to pay for getting this loan. It will also indicate the amount of your down payment.

Once you have found a home the real estate agent will then prepare a contract for you and the seller to sign.

Your mortgage broker will now order an appraisal to show proof of the property value.

The mortgage broker might ask for additional information or documentation, don’t get all up tight this is normal, just supply the information or find the documents needed.

After the appraisal has been completed you will be called by your mortgage broker to sign your loan docs so you can take possession of your new home.

Before signing any loan docs make sure they say exactly what you and your mortgage broker went over when you decided on what mortgage program was best for you.

I hope this has been of some benefit to you, good luck

“FIGHT ON”

William asks…

Home loans?

My husband and I are ready to move out of our dinky little apartment and into our first house. What are the prerequisites to getting a loan to buy a house?

John answers:

Talk with a broker/banker first. Do not seek the help of a Realtor until you know what you can afford. The broker will examine you last two years combined income via w-2 and current pay stubs (If S/E, you’ll need tax returns), assets (401k, IRA’s, Checking account etc.) to determine your ability to repay the loan, plus asset reserves. Have your credit reviewed prior to or the initial meeting with your loan team. Typically, a score of 575 minimum is required for maximum financing, should you not qualify for conventional minimum (100%) your broker may still look at govt. Alternatives like FHA or VA if eligible. There are also many community sponsored programs that allow for down payment assistance, so if you can’t qualify for 100% you may still find a loan using one of these community programs. I would not waste your time getting pre-qualed, go with an actual pre-approval. As it holds more weight.. Upon pre-approval you should enlist the help of a reputable Realtor. He/she will work with you and your broker to find a home that meets you want, and is within your comfort level.

If you have any negative credit issues, you’ll also want to start working on these issues early. Good Luck

Sandra asks…

What is the process for getting pre-approval for a home loan? Is it best to go through your bank?

Thanks!! Would like to do this asap and make an offer (if possible) on the home I’m living in :-)

John answers:

Banks or any other mortgage lender will do a preapproval for you but they prefer you have a home chosen to do the preapproval on-they can match the loan to the home and hopefully the value of the home is reasonable-they put both that and your overall finances under the microscope. If you aren’t making an offer on a home you are essentially still looking. If that’s the case what you want is a prequalification which isn’t much more than a lame estimate of what a lender MAY give you under most circumstances. An added bonus is that by getting prequalifications from different lenders you can often get a snapshot of their different closing costs-so you can compare each against the other.

Michael asks…

I Need the details about home loan?

I need to know the eligibility to obtain the loan & how they will calculate the home loan & how much i need to pay every month as installament to bank?

Regard’s,

Shahul

John answers:

The moment you decide to buy a home, you can put in your application for Home Loan. Yes, you can apply for a loan even before you have selected the property.
The property need not even be in the same city where you are residing. The only condition being that Bank has home loan operations in both the cities.Oneshopfinance helps you to compare home loan interest rates in Mumbai

Home loan process is basically divided in three stages
1 Pre-Approval
2 Legal and Valuation
3 Disbursal

Pre-Approval
Pre-Approval is basically individual credit approval based on the specific set of financial and identity documents.

Legal and Valuation
Legal and Valuation is the process of evaluation of the property documents by the banks empanelled lawyer and valuer , Lawyer checks the legality of the documents wherein the valuers determines the market value of the property

Disbursal
It’s the process of preparing the payorder after submitting all the original documents as per the lawyers report and signing of the agreement between the bank and the applicants of the loan.

If it is refinancing you are interested in, it is possible within 6 months from the date of purchase of property

Eligibility

A number of factors are taken into account when assessing your repayment capacity. Your income, age, number of dependants, qualifications, assets and liabilities, stability/ continuity of your employment / business are some of them.

However, there are ways by which you can enhance your eligibility.

If your spouse is earning, put him/her as a co-applicant. The additional income shall be included to enhance your loan amount. Incidentally, if there are any co-owners they must necessarily be co-applicants. One can include Spouse/Parents/Children as Co-Applicant if you require higher eligibility subject to maximum of three applicant.
Providing additional security like bonds, fixed deposits and LIC policies may also help to enhance eligibility
Following are eligible to apply for Home Loan

Salaried Individuals
Self employed Professionals/Business men
NRIs

To apply for Home Loan

You must be at least 21 years of age when the loan is sanctioned
The loan must terminate before 58 years or retirement ,whichever is earlier in case of salaried and for selfemployed before 65 years.
The maximum tenor that the banks gives the loan is from 5 years to 20-25 years subject to the retirement age.
Your must be employed or self-employed with a regular source of income
The final amount to be sanctioned will depend on your repayment capacity. However, what you ultimately are entitled to will have to conform within the limits fixed for each loan.

Also, when the company looks at the total cost, registration charges, transfer charges and stamp duty costs are included.

Features of Home loan

Banks offer attractive interest rates
Door-step service from enquiry till loan disbursal
Can go for balance transfer from other bank
Maximum loan
85% of the cost of the property (including the cost of the land) and based on the repayment capacity of the customer.
Maximum Term
20 years subject to your retirement age.
Applicant and Co- Applicant to the loan
Home Loans can be applied for either individually or jointly. Proposed owners of the property, will have to be co-applicants. However, the co-applicants need not be coowners.

Floating and Fixed Home Loan Interest Rates.
Adjustable Rate Home Loan
Loan under Adjustable Rate is linked to Retail Prime Lending Rate rates of banks. The rate on your loan will be revised every time, if there is a change in Retail prime lending rate . However, Generally the EMI on the home loan disbursed will not change If the interest rate increases, the interest component in an EMI will increase and the principal component will reduce resulting in an extension of term of the loan, and vice versa when the interest rate decreases.

Fixed Rate
Fixed rates depends on the products which you choose from banks, some banks have fix only for 3-5 years,

Security for the loan is a first mortgage of the property to be financed, normally by way of deposit of the title deeds or such collateral security as may be necessary.

Repayment

You normally repay the loan through Equated Monthly Instalments (EMIs) comprising both principal and interest. If the final disbursement is however still pending, you pay interest on the portion of the loan disbursed before the EMI commences.

Documents

The following documents needs to be submitted for Pre-Approval

The following documents needs to be submitted for Pre-Approval
Salaried Customers Self Employed Professionals Self Employed Businessman
Application form with photograph Application form with photograph Application form with photograph
Identity and Residence Proof Identity and Residence Proof Identity and Residence Proof
Latest Salary-slip Education Qualifications Certificate and Proof of busin

Robert asks…

Question about Home loan?

If i have a down payment of 3500 and ive been preapproved for a loan of 100,000 does that mean i can buy a house for 103,500?

John answers:

There is not a simple answer. It will depend on the loan program and the home you are buying. Pre-approvals are based on the payment amount for which you will qualify. You will need to have the funds available for the down payment and closing costs for the home you want to buy. VA and USDA loans don’t require down payments, but FHA requires 3.5% and you will need a minimum of $3623 down with a $103,500 purchase. It can come from a gift or a grant and most states and many cities have grant programs for first time buyers that meet certain income guidelines based on median incomes for the area. You can negotiate for the seller to pay all or part of your closing costs for any of these programs, but the seller cannot pay your down payment.
Different homes with $103,500 price tags will have different tax rates and different costs to insure. If your income and debts allow you to qualify with the total payment for the home you want, then you can buy the home for $103,500. Talk to your loan officer about your options so you can be confident you’ll be approved when you make an offer on the home you want.

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