Helpful Tips
Pre-Approval Facts & Considerations
Getting pre-approved is an important step in the home buying process. Here's some things to consider during pre-approval stage.
The Facts
Credit:
- Credit inquiries can affect your credit score.
- Credit card activity may affect the amount of home that you may qualify for.
- High credit card balances may affect your credit score.
- The credit score that you receive online may not be the credit score reported when looking for a mortgage.
The Considerations
Income:
- Can I afford my dream home?
- Will discount points help me qualify?
- Can my bonus and commission income help me qualify for a larger home?
- Can the income from our side business be helpful or harmful?
- How do I maximize my credit history?
Down Payment:
- How much money do I need to put down?
- Should I put more money down or should I leave money in my retirement accounts?
- How can I avoid mortgage insurance?
- Can I use gift funds?
- Can I use funds from my business account?
- Does underwriting need to review all of my asset accounts?
Keep Your Credit in Mind
Having good credit definitely has its advantages in home buying, but don't be discouraged if your credit is less than perfect.
We all know that finding a new home takes time, but your complimentary up-front credit approval is fast and easy. In today's competitive buyer market it's important to have your credit approval before submitting an offer. This puts you in a much better negotiating position with potential sellers, and ensures you find a home that fits your budget.
Less than Perfect Credit?
Good credit is ideal, but we all know that unfortunately in this economy many of us don't fall into that category. The good news is that we do offer many types of mortgages to those with not-so-perfect credit, and chances are you may still be able to qualify for home financing.
Things to consider for improving your score:
- Clear up any errors that may appear on those reports as soon as possible.
- You should also consider consolidating any debt you may have.
- The goal is to have your total debt less than 38% of your total income.
- Saving as much as possible prior to beginning the home buying process will ensure a substantial down payment and the potential to lower your rate and monthly payment.
DOs
- DO create a file and keep copies of all your important financial documents as you receive them—check stubs, W-2s, tax returns, bank and investment account statements, rental agreements, etc.
- DO wait to make major purchases such as a new car, boat, or appliance until after your loan has funded.
- DO look for a homeowner's insurance policy for your new home. Consult with the insurer of your current home, your auto insurance agent, and others to get quotes. Remember to give the agent's name and phone number to your escrow officer.
- DO have any donors give you money as soon as possible, if part of your down payment is a gift. Make sure you understand the necessary steps and documentation for gifts.
DON'Ts
- DON'T keep cash in a safe or in an overseas account if you plan to use these funds for your down payment. Do talk with us about how and when to get the money into your U.S. bank account.
- DON'T change careers. If you have to change jobs, consult ahead of time with New American Funding. Your loan cannot fund unless you are on the job we have verified for you.
- DON'T make large deposits to your bank account, but if you need to, save the documentation that shows where the money came from.
- DON'T apply for new credit or give your personal information to anyone else who might run your credit report. Credit inquiries may hurt your score, and will have to be explained to the underwriter.
- DON'T make new purchases with your existing credit cards. The underwriter may require a back-up credit report in a long escrow, and you could lose your approval. If you must make a major purchase, call us so we can go over the impact on your ratios.