Pre-approvals, FHA loans, and Upfront Approval Guarantees, Oh My!

Ready to start your house hunt but not sure how?

First time homebuyers are stressed. It’s overwhelming, terrifying, exciting, and difficult all at once. We get it, and we’re here to help.

First steps first—get pre-approved for a Federal Housing Administration (FHA) loan to set yourself up for success. If you do this before the hunt begins, you’ll be able to put in an offer—stat—when you set foot in your dream home.

Get your pre-approval. Start Here! (Apr 27th, 2024)

What is a pre-approval and why do I need it?

A pre-approval for an FHA loan becomes your house budget. It’s how much you can afford. For a deeper dive into your monthly budget after buying a home, check out this mortgage calculator. It makes planning for the future a bit easier.

According to the Consumer Financial Protection Bureau, “a preapproval letter just says that a lender is willing to lend to you—pending further confirmation of details. A preapproval helps you shop for a home, because it lets the seller know you are a serious buyer.”

When the seller sees an approved FHA loan attached to your offer, they know you’re ready to buy and have government approved funds behind you. This shows sellers that you mean business.

An FHA loan isn’t the only way to buy a home, but it allows a lower down payment and adjustable credit demands.

Find out how much you can afford. Start Here! (Apr 27th, 2024)

The pre-approval process freaks me out. How bad is it?

To be honest, it’s tough, like anything new. But it’s not too tough for a determined first time home buyer, and mostly involves gathering and processing information. Here’s what to expect when you’re applying for pre-approval for an FHA loan.

Your pre-approval checklist:

Proof of Income – it’s not the most-fun process, but once you do it, it’s done. You can check it off the list!

To prepare your financial documents, track down pay stubs, W-2s, or 1099s, bank statements, tax returns for the past few years, and any additional income documentation that might be relevant. Put these all in a safe place and remember where that safe place is.

Proof of Assets – You might have the assets, but you’ll also need to back those assets up. This means bank statements for savings, checking, and investments; proof of any gift funds you might be getting for the house; proof of stocks; sale of other assets; and a closure disclosure if you’re selling another property to buy this one.
Good Credit – Hopefully you’ve been building this one up for a while now. It’s a biggie. Most FHA loan pre-approvals are based on credit and unverified income rather than being fully underwritten, and they are only good for 30 to 60 days. In plain English—a good credit score is essential.

Not sure if your credit is good? You can review your credit report with your current address and contact information to ensure it’s accurate and good enough to start home shopping.

Always aim for healthy credit scores. This means in the ballpark of 740 or higher. Curious about how to build up your credit? Talk to your bank about strategies. Someone there can sit down with you and walk you through the process. Even if you’ve had a difficult time with credit in the past, it’s never too late to turn that around.

Employment Verification—Be ready with at least the last three months of pay stubs. If you’re self-employed it can be a little more complicated. You will need bank statements that show deposits, P&L’s, and/or invoices.
Personal Identification—A current United States driver’s license or a valid passport should do the trick.

Great! I have all this stuff. Now what?

Choose a Lender – Research is key for this step. Consider the various rates of lenders and compare those rates. What are the fees they’re going to charge? Like anything, does the lender feel right to you? Do you trust their commitment to customer service? Do they have a good reputation? Above all, your lender should be a good fit for you.
Submit an Application – Maybe start this step with a cup of hot coffee. Complete a mortgage pre-approval application with your chosen lender. You can usually do this online or in person. Be thorough and accurate with your financial information. This is no time to cut corners.
Provide Documentation – Submit the required financial documents to the lender. Remember the checklist. This includes income verification, assets, debts, and any other requested information.
Undergo a Credit Check – The lender will perform a credit check as part of the pre-approval process.
Receive Pre-Approval Letter – Remember how we started #2 with a cup of coffee? Consider starting this step with a glass of bubbly. If you meet the lender’s criteria, you’ll receive a pre-approval letter. With this letter in your hot little hand, you’re good to start the hunt. The document outlines the maximum loan amount you’re approved for based on your financial situation. Cheers!

What happens after pre-approval?

You know your budget, you have a letter in hand, and you’re (in theory) ready to buy a house. Take a deep breath. You are doing great.

If you’ve set your heart on a particular house, now’s the time to request a home appraisal. When the appraisal is complete and approved, the loan will move onto the next stage.

Home Loan Processing—A qualified mortgage loan processor will review your documentation before passing it on to the underwriting stage.
Underwriting—A lender representative will review loan application documentation to ensure it meets loan requirements established between lender and borrower.
Mortgage Approval Issued—The lender issues an initial approval and may require additional documentation.
Confirmation of the Loan—Your mortgage reviews the final terms of the loan.
Cleared for Closing—A closing coordinator will be in touch to schedule your closing.
Loan Closed—Congratulations, your closing was successful, and your home loan process is complete.
Funded—The final step in your home purchase journey–celebrate!

Want better than a pre-approval? (You probably do.) Check out Moreira Team’s Upfront Approval Guarantee.

I don’t know if you’ve heard how competitive the housing market is. This is how you can be one step ahead during the inevitable bidding war on your dream house. We have something even better than a pre-approval:

Good for 120 days, the Upfront Approval Guarantee is a fully underwritten approval. This means that we verify all relevant bank records, tax statements, credit scores, income, assets, and your debt-to-income ratio. Your competitors will have questions; you’ll have the answers. Get your quote today.