Why get pre-approved

Pre-approval is different from pre-qualifying, as it is a full loan approval instead of an opinion letter. It is recommended to get pre-approval before looking at homes. Finding out what you qualify for will help you look in the right price range.

Determining the Right Price Range

The first step in buying a house is to determine the price range that is right for you. You will need to consider how much you are prepared to invest in your home and how much you will need to borrow. You should also consider how much property taxes and insurance will add to your monthly mortgage payment.

Determining Cash You Will Need

You will need enough cash to cover both your down payment and any closing costs associated

with the purchase. Closing costs vary significantly based on the terms of your loan but are generally 1% to 2% of the purchase price.

Determining Additional Costs

Your Compass agent will help estimate your purchasing power and your carrying costs, but it is highly recommended that you discuss your cash needs and tax ramifications with an accountant and/or financial advisor.

Pre-Approval for a Loan

An offer is given greater consideration by a seller if it is accompanied by a pre-approval letter from a reputable lender or a local mortgage broker. This assures the seller that you will be able to obtain the proposed financing and will not tie up the property needlessly.

Lenders will inquire about the following six critical factors:

1. Income
2. Savings/capital/investments
3. Credit history
4. Debt level/ratio
5. Employment history
6. The value of the property you wish to purchase

Things you should NOT do when applying for a home loan

Below is a list of things to steer clear of when seeking to obtain financing for a home. The following items may be detrimental when trying to move forward with the loan process.

• DON’T buy or lease an auto before you apply for a home loan. Lenders look carefully at your debt-to-income ratio.  A large payment such as a car lease or purchase can greatly impact those ratios and prevent you from qualifying for a home loan.
• DON’T move assets from one bank account to another. These transfers show up as new deposits and complicate the application process, as you must then disclose and document the source of funds for each new account. The lender can verify each account as it currently exists. You can consolidate your accounts later if you need to.
• DON’T change jobs. A new job may involve a probation period, which must be satisfied before income from the new job can be considered for qualifying purposes.
• DON’T buy new furniture or major appliances for your new home. If the new purchases increase the amount of debt you are responsible for, there is the possibility this may disqualify you from getting the loan or cut down on the available funds you need to meet the closing costs.
• DON’T run a credit report on yourself. This will show as an inquiry on your lender’s credit report. Inquiries must be explained in writing.
• DON’T attempt to consolidate bills before speaking with your lender. The lender can advise you if this needs to be done.
• DON’T pack or ship the information needed for the loan application. Important paperwork such as W-2 forms, divorce decrees, and tax returns should not be sent with your household goods. Duplicate copies take weeks to obtain and could stall the closing date on your transaction.