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Navigating the Mortgage Process

Step One: Pre-Approval

With all of the changes taking place in the mortgage industry, we asked our colleague Craig Tashjian of Fairway Independent Mortgage to share his expertise. Here is the first in a series of posts about the mortgage process and what you can do to increase your chances of a stress-free, successful transaction. Take it away, Craig!

As a result of the mortgage crisis, many layers of fact-checking have been added into the mortgage process by regulators, Fannie Mae, Freddie Mac and FHA (the national authorities who finance the majority of mortgage loans in this country).

There are 5 distinct steps in the process: Pre-Approval, Full Application, Loan Submitted to Processing, Submission to Underwriting, and Underwriting. In part one I will address the first step, the Pre-Approval.

1 - Pre Approval.  At this stage the Loan Officer will require that the consumer provide all income and asset documentation to determine mortgage qualification.  An authentic pre-approval includes the following:

  • A credit report
  • W-2's
  • Pay stubs
  • Most recent year or two of Federal Tax returns
  • 2 Months of bank and investment statements

The credit report will be reviewed. The loan data will be put through underwriting, and a pre-approval will be issued. Because it can be weeks or even months from the time the borrower is pre-approved to the time there is an accepted offer on a property the loan officer should address anything that comes up on the credit or in other documentation and educate as to what will be required once the loan is going "live".  In my opinion the pre-approval stage is the most crucial.  If your Loan Officer or bank doesn't ask you for the above documentation and spend the necessary time carefully reviewing the paperwork you may eventually lose out on a home that you would love to buy because you were not professionally pre-approved.  A bank or a mortgage company can issue a pre-approval.  A mortgage broker can't.

Watch this space for the next installment -- Full Application.

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