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How to get pre approved for a home loan

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Can I get a mortgage?
The first step in buying a home is to get preapproved for a mortgage. The mortgage lender will analyze your annual income, your credit history, and credit score. Lenders use a calculation called debt to income to estimate the ideal mortgage payment. Debt to income is a comparison between your monthly income and monthly debts. After providing the mortgage lender with your financial information, the lender will decide which mortgage loan is best suited for you. There are four popular home loans available, FHA, VA, USDA, and Conventional mortgages. See below

The FHA loan is extremely popular due to it low down payment of 3.5% and low credit score requirements. The VA loan is a great way for a cash strapped veteran to purchase a home. The veteran loan does not require a down payment . . . 100% financing . . . and the seller is permitted to pay all closing costs on behalf of the veteran. The USDA loan does not require a down payment and the seller is permitted to pay a percentage of the buyer’s closing costs. If you intend on making a sizable down payment, take a look at the conventional loan.

Are you a first time home buyer?

Get prepared for homeownership with these home buying tips - Four tips for home buyers

What are closing costs? What is a good faith estimate

Closing costs are required home buying expenses. The good faith estimate is the form that lists the home buying costs. Read more

Frequently Asked Questions About Loan Pre Approval 

► Do I qualify for a home loan

Banks and mortgage companies require two years of continuous employment, although there are some exceptions to the two year (24 month) rule. Most mortgage lenders desire a credit score of 620 or greater, however, once again there are exceptions. For example, the FHA home loan will accept a 580 credit score. The mortgage programs require a balance between monthly income and monthly debt obligations. Lenders use a formula called debt to income to help determine the ideal loan amount and monthly mortgage payment. The only way to determine whether you will qualify for a mortgage is to speak to a mortgage loan officer to determine whether you qualify for a home loan.

► How long is a mortgage pre approval good for?

Most lenders will tell you that their pre approval is good for 60 days, but the pre approval is dependent on maintaining the status quo for income, credit, and employment that was provided to the lender. Taking on more debt or reducing cash assets can nullify the pre approval. Don't quit your job or make any changes to your employment. In short, the pre approval can extend much further than 60 days provided no changes have occurred since approval.

► How long does mortgage pre approval take?

Pre approval can take as little as 30 minutes, but could stretch out weeks if you do not have all your information ready for the loan officer. The mortgage lender will want to see your most paystub or ask you to recite the information on the paystub. He or she may want to see (or hear) your W-2 earnings from last year. Are you receiving or paying child support or alimony? The lender needs all information relating to monthly income and monthly debt obligations. The self employed, rental, and non-taxable income can slow down the pre approval. Prior to speaking to a loan officer for pre approval or pre qualification, have your tax returns for the two previous years, your most recent paystub and bank statements and any other savings account(s). Including, 401K and deferred retirement accounts.

► Does a pre approval letter guarantee a loan?

When a lender provides you with a pre approval letter, he or she is basing the pre approval on a hypothetical sale. The lender is estimating the sales price, real estate taxes and homeowners insurance based on your financial information; therefore, no pre approval can be guaranteed.

► Does getting pre approval hurt credit?

The credit inquiry will have a nominal impact, if any.

► How do I get pre approved for a mortgage loan?

Any of the lenders below will be happy to start the pre approval process.

What is an FHA home loan?

Fha logo

FHA home loans are "insured" by the Federal Government. The benefits of FHA loans include low down payment, lower credit score requirements and allowable seller paid closing costs.

What is a Conventional Loan?

Fannie Mae Logo

Freddie Mac logo

Conventional mortgages are loans that are not guaranteed or insured by any Federal agency, specifically, the Federal Housing Administration (FHA loans), United States Department of Agriculture (USDA loans) and Veterans Administration (VA loans).

Conventional mortgages are also known as "conforming" loans because they "conform" to the maximum lending limit and underwriting guidelines of Fannie Mae and Freddie Mac. Learn more

Fannie Mae lowers the down payment to 3% - Read more

What is a USDA home loan?

USDA logo

This USDA mortgage is designed for low to moderate income home buyers who purchase a home in eligible rural areas. The USDA home loan provides 100% financing for eligible applicants. That’s right . . . no down payment! There are no purchase price limits and the seller can pay a percentage of the buyer’s closing costs. The loan program also permits less than perfect credit. The USDA home loan is administered by the US Department of Agriculture.
Read more

VA home loan

Veterans Administraton logo

The Veteran home loan does not require a down payment -
That's right, 100% financing! -

And, the seller is permitted to pay all reasonable closing costs on behalf of the veteran.
Learn more

Who has the best mortgage rates?

Man writing a checkUse the interest rate comparison chart below to find the lowest interest rates for FHA, VA, USDA, conventional and jumbo mortgages.

The Bankrate calculators will estimate your monthly mortgage payment for 5, 10, 15, 20, 25, 30 and 40 year loan terms & loan payoff.

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