Why is a Pre-Approval Important?
It takes the stress out of the buying process for both the buyer and seller.
Buying a home is an exciting roller coaster! Obtaining a mortgage pre-approval can make the ride less scary and much more enjoyable. A pre-approval indicates that a lender has looked at your credit history and verified your ability to afford a certain loan amount. This reassures the seller that you can buy their home.
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Why is this essential?
Most importantly, a pre-approval brings peace of mind by limiting surprises that could impact your purchase transaction or, in some cases, prevent you from buying all together.
Your real estate agent can perform targeted property searches knowing what you can afford.
Most sellers won’t even LOOK at an offer unless the buyer has been pre-approved by a reputable lender. You stand a MUCH better chance of buying the home if you are pre-approved first.
The Click n’ Close process makes this a snap! The application can be completed in mere minutes after answering simple questions and utilizing the secure platform to import your bank statements directly from the financial institution.
Click n’ Close retrieves and analyzes your credit history digitally through the secure platform.
Our digital integrations import your bank and employment information directly into your application, verifying these records as they are imported. This shaves days off the loan approval process, and allows us to provide you with a pre-approval letter in just minutes!
Once your pre-approval letter is generated, your real estate agent will help you shop with confidence, knowing you have already secured financing.
Once you have narrowed in on a home you like, your real estate agent will work to negotiate an agreeable contract with the property seller. Your pre-approval letter will strengthen your offer for a fair, affordable sales price.
When your offer is accepted, your loan officer will structure a loan that works best for your current needs and long term goals. They will help you find the best interest rate and work with the loan processor to ensure that any additional documentation they might need is obtained. You will receive a batch of initial disclosures that you can review and sign electronically from the comfort of your home. These documents will inform you of your various rights and requirements of the loan process, as well as provide you with a snapshot of your loan details and fees.
Soon after your home contract is accepted by the seller, an appraisal valuation will likely be ordered. A licensed property appraiser will make a visit to the home, take photos and generate a report detailing what they deem to be the appraised value of the property.
Once your appraisal is complete and any ancillary documents have been provided to your Loan Officer and Processor, your loan transaction will be presented to an underwriter to ensure that all aspects of your loan meets various program guidelines and legal requirements. You might be asked to provide additional information or documentation to obtain final loan approval.
After an underwriter has approved your loan, you will receive your preliminary closing estimate of fees and a closing date will be determined. When your closing date is at hand, you will receive your closing documents to review and sign. These can be signed using our eClosing platform, from the comfort of your home. After your documents are signed and the title company funds the loan, the keys to the home are yours!
Why are Credit Scores Important?
Credit scoring is a tool that provides lenders with a way of determining the level of risk they accept when loaning money to individuals. A higher credit score indicates that you manage debt responsibly, and increases your chances that a lender will say YES to your request to borrower money. There are multiple factors in determining a credit score. Familiarizing yourself with these aspects will help you navigate the murky waters of credit score confusion.
Do you pay bills on time? If not, your credit history will tell the tale. Repeated on time payments over time demonstrate to lenders that you take your obligations seriously. Payment history has the most significant effect on credit scores and is a key factor lenders consider in determining risk.
How much do you owe? If you have credit cards that are maxed out, this will impact your credit score negatively. Lenders want to see that you have credit available, but that you have borrowed against it responsibly. Ideally, you want to have 30% or less of credit owed vs. credit available. To determine this, look at the credit limit for each account and compare it to what you owe. This is the second most impactful factor in determining a credit score.
Length of Credit History
The longer credit history you have, the better lenders can see your borrowing & repayment habits. Life’s ups and downs can impact individuals’ finances and the way in which they utilize their existing credit lines. Demonstrating responsible history over time is the next most impactful factor in determining credit scores.
Mix of Credit Lines
Having different types of credit lines in your history can also enhance your scores, as it can demonstrate responsible history of credit utilization over a larger scale. However, this is a smaller factor in determining your overall credit scores and shouldn’t be a motivation to acquire additional debt just add to your mix of credit.
New Credit & Inquiries
Recent multiple inquiries on a credit profile can create the impression that an individual is planning to acquire new debt. Your credit scores can be negatively impacted if your profile shows multiple inquiries over a short period of time. Likewise, acquiring new debt during your mortgage loan approval process can cause your loan to be declined if your “debt to income ratio” is close to the maximum program guidelines or if your scores drop. Best practice is to refrain from shopping for or acquiring new debt during this time. Your lender may request a letter of explanation to understand any recent inquiries that show up on your credit history.