Temecula First Time Home Buyers | Murrieta First Time Home Buyers
Recently, I was with some Temecula first time home buyers. they were confused about being pre-qualified. I explained to them how they must exercise caution not to add any additional debt to their credit report.During the loan process:
Never make any large purchases
Keep your credit cards balances at 1/2 of the credit limit, (or less)
Don't change your employment
Wait until after escrow is closed and you own the home before making any changes to your credit or employment.
My clients thought that their pre-approval letter meant they were already approved for a loan. They didn't know that purchasing a car or any other item could decrease their ability to be approved for their loan.
Definitions of the three most commonly used loan approval terms all have very distinct and different meanings.
Loan Pre-qualification -(Pre-qual letter): When you submit any offer to purchase a home, a pre-qualification letter is submitted along with the offer to support your credit worthiness. The process includes the lender looking at your credit report and using the information you supply them about personal income and debt. This helps determine how much loan you can afford. Your credit accounts and employment information are not verified.
Pre-approval This happens when you have a signed purchase agreement for a home. Now all credit and employment information are verified. Verifications of Employment, (VOE) and Verifications of Bank Deposits, (VOD) for your down payment funds are sent directly to your bank and your employer to be filled out by them. (Often, deposits are made by a family member and a gift letter is initiated).
The home is appraised at this time and must appraise for the sale amount. If the appraisal is returned with a lower value, then the contract is re-negotiated.
Final loan approval This occurs after the property has been appraised, all required documentation is in the hands of the lender. All contingencies have been met. A loan underwriter examines your loan qualification. The underwriter may ask for additional information and may also obtain a final credit report to ensure that your income to debt ratios are still acceptable.
Don't make any large purchases and don't obtain any additional lines of credit. This is not a good time to change your employment. Any of these circumstances may slow down your approval process or even disqualify your loan application altogether.
