The Basics of the Pre-Approval Process

Everyone is looking for that edge when they search for a new home loan, and at Altius Mortgage, we’ll help you get it. One of the processes we encourage our clients to investigate thoroughly: Pre-approval.

Pre-approval is a process where you and a potential lender lay out many financial details, and the lender determines whether they’re confident in your ability to meet the requirements of a given loan and given mortgage rates. Let’s look at the financial elements under consideration during pre-approval, plus how it can benefit you in the long run.

Items Considered

When you meet with a lender, they’ll thoroughly investigate all your finances. This will include a credit check, plus an in-depth look at your base income compared with your monthly expenses.

One cautionary note: Don’t confuse the pre-approval process with the pre-qualification process. The latter is a much less formal procedure, and is really just a basic meet-and-greet with a lender – the latter is a real financial proceeding, and very few people who come through pre-approval unscathed will end up being rejected for a loan.

Pre-Approval Preparation

Before a pre-approval meeting, you need to make sure your finances are fully organized. This starts with credit score, for which there are easy tools online to monitor your current standing without raising the score itself. You also want a firm understanding of your income and expenses – any surprises during the actual pre-approval process could cost you.

Documents to Bring

There are a few specific documents to make sure you have when you meet a lender for pre-approval:

  • Personal information: Things like Social Security information and a form of ID will be required for lenders to run credit and other appropriate financial checks.
  • Income information: You’ll need two years’ worth of tax returns, pay stubs and W-2 forms. If you have any outside sources of income not reflected in these, you’ll need evidence of those as well.
  • Asset information: This includes any assets not listed as income, such as savings, investments or monetary gifts and loans.

There’s much more to learn about the mortgage process, and we’re here to teach you at Altius mortgage. Speak to one of our brokers today.

Avoiding Common Mortgage Mistakes

The mortgage application process can be complex or difficult for many people, and that’s why a trusted mortgage broker like Altius Mortgage is so important. We’ve seen every situation possible in this industry, and our team is here to guide you through every step.

This means pointing you in the right direction in many areas, but it also means steering you away from the wrong direction. With that in mind, let’s look at a few of the most common mistakes we see people make before or during the mortgage approval process. Once you’ve finished here, you should have a good idea of a few of the biggest pitfalls to avoid.

Down Payment

In the majority of loan situations, your lender will require a 20 percent down payment. If you aren’t able to get this, though, you’ll be required to pay what’s called mortgage insurance: A protection for the lender against the possibility of you defaulting on payments. You pay these monthly insurance premiums, and they can often be very pricy – more pricy than the original down payment over the life of the loan, in many cases. Coming up with the lump sum up front can be difficult, but it’s worth the effort to avoid additional expenses.

APR

You hear about APR on television commercials, but few people actually know what it means. APR refers to the final cost you’ll pay on a mortgage, including taxes and any lender fees. Some lenders will show you a pretty-looking number for your mortgage rates, but then hit you with a bunch of big fees in the paperwork fees. This is avoided if you’re demanding the APR cost.

Additional Costs

Besides these kinds of fees, there are other costs you have to plan for. Things like maintenance, potential emergencies and general bits of upkeep will cost money, and we recommend that you keep at least 1 or 2 percent of your yearly budget set aside for these realities.

Credit Score

Credit score goes a long way to determining several major factors, including your interest rate. You should be checking this score well in advance of shopping for a loan – there are many free services online to do so.

Want to learn more about any part of the home loan process, or interested in scheduling a consultation? Speak to one of our brokers at Altius Mortgage today.