Preapproval - Documents verified and factors involved

Sam

Any borrower willing to go for a mortgage loan should first get pre-qualified with a few lenders and then get pre-approved with the lender of his choice. Pre-qualified implies that he may get a loan based on his income and credit history. But pre-approval takes a borrower one step further towards getting a mortgage loan. It gives a confirmation to a borrower regarding a certain loan amount payable within a specified time period.

Pre-approval involves the verification of the following elements.

Borrower's income:

Federal tax returns and W-2 forms for the past 2 years.

A recent paycheck displaying the name, Social security number, name and address of the employer and proof of a second income such as a second job, VA and retirement benefits, any overtime bonus etc.

Borrowers' assets:

A list of bank accounts, statements of the checking and savings account for the previous 2 to 3 months.

A record of investments, mutual fund statements, real estate licenses and stock certificates, copies of automobiles, if any.

Borrower's credit history:

List of creditors.

Credit card bills and proofs of monthly payments towards consumer debts such as car loans, student loans, and other personal loans.

Evidences regarding payments in mortgage as well as payments towards rent.

Proofs of child support and alimony.

Information about the purchase:

Home sales contract showing the purchase price, in case a borrower has selected the house before getting the loan.

A copy of the cancelled deposit check provided the borrower makes a deposit to the seller towards the purchase price of the house.

These documents help a lender process a loan application, although there are lenders who may not wish to review all them on account of excellent credit score of a borrower.

There are some factors that affect the loan application process. These are the collateral used to secure a mortgage loan, the credit reputation of a borrower as well as his loan repaying ability with respect to his income.

Collateral:
A lender checks whether a borrower's home value can support his mortgage loan amount. Generally, lenders do not prefer the loan amount to exceed 95% of the appraised value or sale price, whichever is less. They prefer a down payment of about 10% to 20% of the sale price of the house and a closing cost of about 3% to 6% of the loan amount.
Credit reputation:
Usually the lender orders a credit report of the borrower from any credit reporting agency to assess his loan repaying ability. It allows him to know whether the latter has made any late payments in the past and if he has come across foreclosure or filed bankruptcy in the past.
Loan repaying ability:
The lender also verifies as to whether a borrower can make regular mortgage payments with respect to his monthly income and payment towards other debts. There are two ratios - the front end and back end ratios, which help to find out whether a borrower can afford his mortgage payments.

Pre-approval is an important step towards acquiring a mortgage loan. It helps a lender analyze the risk in processing the loan and involves a number of steps that ensure a fair mortgage deal.

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Can i get forms needed to get a pre approval for a home loan?

gmakerley · Posted: Thu Mar 26, 2009 1:21 pm Post subject:

carol, there are no forms for you to use on your own. when you sit with, or speak with (phone) a lender, you will provide your personal information (name, SS #, birthdate, address, etc.) and the lender will run a credit report first. you'll be asked, also, to provide recent pay stubs and bank statements to verify that you make enough money to qualify and that you've got a few dollars or so in your bank accounts.

with all this information, your lender can provide you with a prequalification (or not), depending on your credit and your income vs. expenses.

there's not a specific form you need to get prequalified.

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