Loan Officer, Ben Morton, discusses the loan application process with Patrick Birdsong who stresses the importance of getting a “pre-approval” letter before shopping for a home. Ben describes the items that a buyer will need for the loan application whether it is done in person or online.
Typically, a buyer will need a W-2 or 1099 to document income, the two previous months of bank statements, account information and loan balances for any outstanding loans including credit cards, student loans and car payments. For self employed buyers, the lender will also want to see the previous year’s tax returns. By gathering these items in advance, the loan process will move along more quickly.
The loan officer will get written permission to run a credit report and get requests signed to verify employment. It generally takes several weeks for the loan to be “processed”. During this time, the lender will verify employment and income and any credit balances with creditors.
Once a lender has received the loan application and run a credit report, the lender will issue a “pre-approval” letter stating that the borrower is “pre-qualified” to purchase a property up to a certain price. When we write an offer on a property for our clients, we include this letter with the offer so that the seller is confident that the buyer can get a loan for the offer price. This is a very important negotiating tool and can make a difference in getting your offer accepted. When comparing the offer of two buyers, a seller will always choose the offer where the buyer has the best proof of their credit worthiness.
Most lenders have a loan application that a buyer can submit online, but it is best to also speak with the loan officer personally so that you can decide together what loan program best suits your needs. By creating a good rapport with the loan officer, you will have another invaluable relationship that you can count on for all of your lending needs over the years. A good loan officer like a good real estate agent, should be a valuable resource for life, and they are not all created equally. An honest and competent lender is a very important part of the home buying process.