The mortgage pre-approval process is probably the most important thing to a buyer's success in purchasing a home for several reasons. The first thing this does is let the buyer know whether or not he or she is qualified to buy a home. It also let's him know the maximum amount he qualifies to buy. Knowing these things is important so that the buyer doesn't waste his time or the Realtor's time looking at homes he won't be able to afford. From an emotional aspect, it also helps to only look at homes a buyer can afford rather than possibly falling in love with something he can't and then being disappointed with the homes in his price range.
Getting pre-approved is more than just answering a loan officer's questions so that he can fill in the blanks on the loan application. It is extremely important to provide the income and asset documentation, along with any other special documentation (HUD settlement statement for prior short sales - read about the short sale, foreclosure and bankruptcy guidelines, bankruptcy discharge papers if the buyer had a bankruptcy, divorce decree for those who are divorced) so that the loan officer can verify the information provided on the loan application and issue a proper mortgage pre-approval. Income documentation to be verified includes the last two years of tax returns (including business returns for self-employed borrowers) and W-2s and the most recent full month of pay stubs. If the borrower is retired, proof of pension or investment income should be provided along with Social Security award letters.
Proof of asset documentation requires the potential borrower to provide the last two months of bank statements (all pages) for all accounts along with the most recent quarterly statement for retirement accounts like a 401(k) or a Roth IRA. The more assets a loan officer can verify, the better.
Once a loan officer has verified all of the necessary documentation, they can provide a letter to the buyer's Realtor stating that the buyer is pre-approved for a given amount AND that the income and asset documentation (along with any and all other pertinent documentation) has been verified. By providing an approval like this, the seller and his agent will know that there shouldn't be any surprises throughout the process, at least as it pertains to the buyer. A strong approval letter where the income and assets have been verified is much more likely to get the offer accepted than one where no verification has occurred. The process is the same for FHA, VA and conventional loans.
The Mortgage Bond Market
The mortgage bond market is up slightly on the day with the benchmark FNMA 3.5 up 16 basis points as of this writing. The Michigan Consumer Sentiment Index came in at 85.1 after a reading of 84.1 last month and an expectation of 84.2. All else being equal, rates are better on Mondays than on Fridays since the market has a hedge for what may happen over the weekend. The next big thing to look for that could move the market is the employment report from the BLS next Friday morning. It has surprised to the good side the last few times; in fact, on July 5th, it surprised so strongly that the benchmark bond fell 200 basis points on that day - this is a huge move that is equal to about .5% in rate. We have recovered nicely since then but I would be very cautious about floating a rate into this report. My recommendation would be to lock it if you have a loan that is far enough along in the process that will allow you to do that.
Please feel free to share this with anyone who may be looking for a loan or needing to go through the mortgage pre-approval process. I'd be honored to help them obtain financing for their home purchase. I can be reached at 702-812-1214. I'd love to see what your thoughts are relative to any of this content - feel free to comment below.
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