We are well aware of the value presented by a Pre-Approval certificate when our clients are faced with competing offers on a home. But in today's lending environment, Pre-Approvals are even more valuable is assuring the preparedness of our clients. Credit requirements have tightened, credit scores are becoming more stringent, and lender qualifications are changing by the day.
In order for a Pre-Approval to be a valuable asset, we need to prepare our clients to provide the appropriate documentation and understand the details of mortgage financing. The Pre-Approval process is detailed analysis of a client's Income, Assets, and Debts. Essentially, we are evaluating the stability and likelihood of continuance of employment and income; the availability of acceptable liquid assets; and the quality of credit history. Once we have assembled this information along with supporting documentation; our lending partners are able to make an informed decision and provide useful counsel to our clients.
As you prepare your clients for this process, please remember to collect the following information:
1. Past 2-years federal tax returns; all schedules
2. Past 2-years W-2, 1099, and K1 statements for all sources of income
3. Most recent pay stub that reflects a minimum of 30-days income
4. Past 2-months bank statements (savings, checking, investment account, IRA, etc.)
5. Borrower authorization for credit verification
6. Proof of identity; i.e. copy of driver's license or government issued ID and Social Security Card
While this list is not inclusive of all information that may be necessary, it is sufficient to begin the process and develop a baseline for Pre-Approval.
Remember, not all Pre-Approvals are created equal; and unless the lender has sufficiently documented the findings you may find the Pre-Approval not worth the paper it is written on. Real Finance Solutions strives to educate our counselors and clients on the importance of being prepared as they enter the home buying process.
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