As a certified Pricing Strategy Advisor, Judi understands the importance of getting pre-qualified prior to looking at homes and prior to making an offer.....Here are just four reasons
1. Pre-qualification acts as a dry run of the loan application process. The mortgage lender will use details you provide about your credit, income, assets and debts to arrive at an estimate of how much mortgage you can afford. The whole process may take only minutes or a few hours at most, and is free.
2. While a "pre-qual" is non-binding to the lender (because the information you provide has not been verified), it does serve as a good indication to potential sellers of your general creditworthiness.
3. These days most sellers will NOT accept an offer without at least a pre-approval letter, so if you are serious about buying this is the first step towards getting you in your new home.
4. Not all lenders are alike. Red flags may surface in credit reports, income documents or asset account statements – and when they surface, they can be lethal to a real estate deal. A key ingredient of an action plan is to recommend loan officers who are willing and able to provide a “red flag analysis.” This analysis is a detailed, comprehensive disclosure that quantifies a buyer’s creditworthiness and his or her maximum purchase power based on the client’s credit report and verifiable income and assets. Like a pre-approval, a “red flag analysis” isn’t a loan commitment; its value rests in eliminating the shortcomings of a pre-approval letter and creating a positive environment for everyone.
Common Red Flag issues
- Disputed accounts
- Collection or judgment accounts
- Deferred student loans
- Late payments on installment loans
- Recent changes in employment or job responsibilities
- Self-employed for less than 2 years
- Tax returns show Schedule E losses
- Tax returns reflect alimony payments
- Inconsistent history of supplemental income
- Base pay fluctuates from one pay period to another
- Gaps in employment
- Large cash deposits
- Insufficient funds to cover closing costs
- Insufficient funds to cover post-closing reserves