Decide How Much You Can Afford
Shop for Loans
The newspaper and the Internet are good places to start shopping for a loan. Look for information on interest rates and on points from several lenders or brokers. Since rates and points can change daily, you'll want to check the local business section of the newspaper often when shopping for a home loan. The promotional advertising may not list the fees associated with the loan, so be sure to ask the lenders about fees.
| TIP: | Beware of some advertisements that may be formatted to look like a news article rather than an advertisement. |
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The Mortgage Shopping Worksheet
Print the Mortgage Shopping Worksheet and take it with you when you speak to each lender or broker. Be sure to write down all the information you obtain. Don't be afraid to make lenders and brokers compete with each other for your business by letting them know that you're shopping around for the best deal.
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Loan Pre-Qualification Vs. Loan Pre-Approval
Loan pre-qualification is a best guess at your housing and loan affordability. Pre-qualification is typically based upon a verbal conversation between potential borrowers and a lender. It doesn't include formal underwriting or proof of documentation to support the borrower's loan request. A loan pre-qualification is not a commitment to lend. It's only as accurate as the information given, and the lender may change any of the information provided.
Loan pre-approval comes after a formal underwriting of a borrower's loan request. Loan pre-approval is achieved with a complete mortgage loan application and typically includes these basic documents:
- Most recent pay stubs (last 2-4 months) and identification of all employment sources.
- Tax Returns: Current year and past year including all schedules and attachments such as W-2’s,1099’s and 1098’s
- Verification of all assets including banking, investment, and retirement statements.
- Names, addresses, account numbers, and amounts owed to all creditors.
- Proof of down payment including cash or gifts.
- Letter(s) of explanation on credit issues, gaps in employment history, and bankruptcy
- Contact information on all residences within the past two years including names and phone numbers of landlord.
| TIP: | It's important not to make any changes to your financial condition during the loan process. Avoid any major asset purchases, new debts, or changes in your employment. This will affect your approval rating. |
