November 10, 2020
When you go to explore your home loan options, there are two steps you’ll take to get things started and moving forward. One is getting pre-qualified for the loan using some basic (but important) information about your income, credit history, and other variables.
The other step is to get pre-approved, which is a more involved process that requires more information building on what you previously submitted in the pre-qualification process. What kind of information does a potential borrower need for these applications?
It helps to think like a lender when dealing with questions like these; your loan officer needs information to establish your employment and income history, your patterns of credit use, the size of the loan you need, etc.
For pre-qualifying, which is something you can do in your home loan journey before you have decided on a specific house to make an offer on, expect to enter general information about your income (monthly and annual), the amount of debt you carry each month, and your credit scores.
You should also be prepared to enter a price range for the home you want to buy. The size of your loan and monthly mortgage payment will be important details later when the lender has reviewed your credit report, verified your income, etc.
When it comes time to get pre-approval for an FHA mortgage so you can make an offer on a house when the time is right, your lender will need more information. That can include contact details for your employers, tax returns (often for the last two years), bank statements where required.
You’ll be asked to sign or acknowledge forms giving your loan officer permission to request your credit report and other information protected by the Privacy Act in association with processing your mortgage loan application.
At this stage you should have an asking price range in mind if you don’t have a specific number, the size of your loan will depend in part on whether the sale price of the house is higher or lower than the appraised value.
There are some borrowers who are required (at both stages in this process) to submit additional materials. If you are applying for an FHA loan as a self-employed borrower or small business owner, you may be required to submit additional documentation associated with your business such as business plans, profit-and-loss statements, etc.
If you are a seasonal employee you may need to show a longer period of employment to establish that your income is likely to continue, and those who recently started earning commissions may be required to earn in that manner for a minimum period of time for them to count as verifiable income for the loan.
Some requirements will vary depending on the lender; state law or other regulations may affect some loans differently than others. Your loan officer will explain any unique-to-the-lender details in this area.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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