TIME, ENERGY, EFFORT
Whether buying a home for the 1st time or selling your home, to purchase a home, you will spend a great deal of Time, Energy, Effort, and Money looking for and selling a home. In addition, you will probably enlist the help of a professional realtor to guide you thru the process. You do not want to do all this work only to find out that you cannot qualify for a home loan.
WHAT WE LOOK AT WHEN GETTING A BUYER PRE-QUALIFIED
- PAIL – Property, Assets, Income, Liabilities – these are the keystone items that we get and verify throughout the loan process. Since the Client is looking for a home, we are only reviewing Assets, Income, and Liabilities with the goal of determining the Property Value the client can afford.
- ASSETS – One of the first questions we want to ask is where is the money for the down payment coming from? All Assets must be verifiable. Large deposits that cannot be sourced cannot be used. Gifts from unauthorized sources cannot be used. Cash on Hand cannot be used. The biggest problem that I see with assets, especially with 1st time home buyers, is unrealistic expectations for Down Payment Requirement
- Example: I had a client that gave a personal loan for $20,000 to a friend/family member. His cash to close was coming from that person. There was no way to verify the payment or where it was coming from. I could not use this. The client had to get payment of the loan and let the funds season for 2 days in their account before we could use them to close.
- INCOME – This is a big one. Job changes, Commission jobs, Self Employeed, Retirement income, Alimony, Child Support, Social Security income, part-time income, Going from Salaried to Contract employment. All these Are questions that must be asked before determining usable income.
- Self Employed – We always need to look at tax returns to see actual income
- Example – My client told me about his income and he had just changed from w-2 to 1099 at his work. Normally this would mean that he would have to wait 2 years to use his income because 1099 is considered self employed. We were able to use a rule on an FHA loan and get him qualified.
- LIABILITIES – This is where we pull your credit and make sure there are no suprises…We are looking for Score, Debt, Liens, collections and charge offs, time since Bankruptcies and Foreclosures.
- Example 1 – My client was sure their credit was fine and they had their home listed for sale. After I pulled their credit, their husband had made late payments on a couple of credit cards. His score had dropped to below 580. I was able to run a credit analyzer and tell them what to do to correct the problem, but it would have been better had we done a review months earlier when they were planning on selling their home.
- Example 2 – My client had a foreclosure in a bankruptcy 4 years ago. 3 years must pass to do an FHA loan after Foreclosure. We checked the deeds to see when the foreclosure deed was filed. It was filed 2 years after the Bankruptcy. This required us to wait an additional year to be able to do a loan for the client.
Hope this helps clarify the reason for getting Pre-Qualified before buying a home.
Managing Partner, Options Mortgage Services