Speak with a loan professional before you start to shop for a home!

It's important to know how much home you can afford, obtain a written pre-approval letter, and provide yourself with a superior negotiating position once you find the right property.

Make sure your mortgage broker or banker is well-educated, experienced, and is on top of recent guideline changes with the banks and investors he deals with.

Here are some questions lender should asks  today before determining the buyer’s qualification to purchase:

• Do you currently rent from a management company or an individual homeowner?
• Do you have cancelled rent checks if it becomes necessary to show them?
• How much do you currently pay in rent or on their mortgage?
• How much money do you have in liquid assets?
• Do you have money saved for down payment? How about reserves?
• If you have bought before and are buying a new house, how was you mortgage history in the last 12 months?
• Do you have any mortgage or rental lates in the last 12 months? How about in the last three years?

Lenders have tightened their guidelines because they have to. Foreclosures on mainland are up dramatically. When the housing market was booming, banks relaxed their guidelines so that more people than ever were able to purchase a new home. Loans were made to people who, quite possibly, should never have been given loans. Today, many of those loans are going into default.

Pre-Approval vs. Pre-Qualification

Pre-qualification typically means that a buyer has told a loan officer how much income the buyer earns, how much money the buyer has in the bank, and the state of the buyer’s credit. Based on this information, the loan officer can calculate the approximate price range a buyer might be able to afford. However, just because the buyer is pre-qualified for a certain amount does not mean that the buyer is guaranteed to be able to purchase a home for that amount. For example, a buyer gets pre-qualified for $165,000. That buyer places an offer on a home for $163,000. When the loan officer delves deeper into the buyer’s credit and the buyer’s ability to pay, it may be determined that the buyer really only qualifies for $152,000. This problem can be avoided by getting pre-approved before shopping for a home.

Getting pre-approved is the best way to know what you can purchase. By providing the items needed to get pre-approved you can rest assured there will not be any surprises later in your transaction.

How to get Pre-Approved
The following items are needed for pre-approval:

• Past two years W2’s
• Past two pay stubs
• Past two months bank statements
• Past two statements on any retirement accounts or other financial accounts
• Copy of award letter if receiving social security or a pension
• For a veteran wishing to do a VA loan please provide the DD214 and certificate of eligibility
• Explanation of any late payments or collections in the past two years
• Bankruptcy discharge papers if a bankruptcy occurred in the past seven years
• Court documents for alimony or child support if applicable, and proof of receipt

• You co-signed and that person has been late, thus reflecting a late payment on your report.
• Your medical insurance did not cover the full cost of a visit and there is a $50 medical collection on your report.
• The last time you moved, the cable company did not account for picking up your cable box. Now they are showing a $400 collection (this happens a lot).