Pre-Qualification/Pre-Approval. 

Before shopping for a home, it is important to get pre-approved so you have budget parameters at the outset. In addition to knowing how much you can afford, getting prequalified will prepare you for how much you're likely to spend purchasing a home and can be a good incentive to set a savings goal between pre-approval and purchase.

The lender will pull your credit (this is a hard pull) and verify income verbally to obtain a pre-approval. This only takes 15 minutes or so and can be done over the phone. 

The pre-qualification approval lasts 90 days and the 2-point hit to your credit will recoup in 120 days, so even if you don't purchase a home within 90 days of the pre-qualification pull, your approval amount and terms aren't going to change drastically assuming there are no major life changes in the interim. 

Once you go into contract on a home, you will have to complete the full mortgage application process. 

Documents required when applying for a mortgage: 

■ Paycheck stubs for the past 30 days.

■ W-2 forms for the past two years.

■ Information about long-term debts, like car loans, student loans, etc.

■ Recent statements from all of your bank accounts.

■ Tax returns for the past two years if you’re self-employed.

■ Proof of any supplemental income.

Liquid cash necessary when purchasing a home: 

  • Appraisal: $600-$800 
  • Inspection: $300-$500 
  • Closing Costs: Title company fees, origination/lender fees, escrow account deposits and fees 
    • $350K home purchase -  ~$5,500
    • $550K home purchase - ~$7,500-$8,000
    • $800K home purchase - ~$8,500 

What is an escrow account? 

Most lenders require you to pay in advance for some items that will be due after closing. These prepaid items generally include homeowner’s insurance premiums and property taxes. The first page of the Loan Estimate indicates whether or not an escrow account is required and estimates the amount of your monthly escrow payment. 

Credit Score Requirements. 

  • FHA | 580 minimum 
  • Conventional | 620 (lower the credit score, the higher the rate) 

FHA Loans. 

  • Require less money for a down payment
  • Interest rate is going to be lower 
  • Mortgage insurance requirement is mandatory for the duration of the loan unless you refinance to a conventional loan, which could cost $3-5K to do so, depending on your loan amount 
  • Be prepared to pay a 1.75% funding fee 

Click here for an in-depth guide on the mortgage process.