What does “pre-qualification” mean? It means that you are receiving an opinion based on Q&A performed by a Mortgage Professional. Their conclusions are only going to be as good as your answers to their questions. In other words, if you really want to know how much you will qualify for when seeking a home loan, then it is imperative that you are accurate and honest when responding to the Loan Officers’ questions. No matter what though; a pre-qualification is only an opinion, it is NOT the same as a pre-approval for a loan.
What does my credit score need to be? This is an open-ended question. The answer (in mortgage land) differs from the answer when buying a car, or when being approved to buy furniture, etc. Generally speaking if you are buying a home which will become your primary residence the lender is going to be looking for you to have a minimum score of 620 (at least today). This score is referred to as being your “middle” score because the lender is pulling a more advanced credit report than does the car dealer or the furniture store management. Mortgage approvals require a Tri-Merged report (3 bureaus reported on one format). Each will use slightly different methods to determine the final score, so (in mortgage land) we will throw out the highest score and the lowest score leaving the middle one which becomes the score used to qualify.
How much down payment do I need? Primary residence/first time buyers can actually get into their home with as little as 3% down. Of course there are other factors involved for this version, so the easiest variation will be 3.5% down. This is only for a Primary residence because the less a person has into the deal of their own blood, sweat and tears, the higher the risk to the lender. If you are in a position of having 20% to invest in the down payment you will get the best rates, fees, etc. Vacation or Second homes can get away with as little as 10% down and an Investment purchase will be more like 25%.
Will a bankruptcy eliminate me from qualifying? Yes, it can……depending. If you filed a personal bankruptcy and it has been less than 2 years from discharge, then you will just have to wait it out for a bit. 3 years out and you can do an FHA loan (government insured), while 4 years out will get you back in the game again. Bankruptcy is touchy since there are several different varieties, hence different rationale is used in qualifying for a mortgage loan. Best to speak with the Loan Officer on this one before getting too excited.
Once I am qualified, how long is it good for? Well, a pre-approval (issued by the Loan Officer prior to your file being underwritten) is typically used for purposes of shopping for a home. Normal pre-approvals are good from 90 to 120 days; however, the credit report will not last this long and will have to be reissued if it gets to old.
STEVE LOLLI, Mortgage Loan Orig - Team, NMLS #1529914 Homebridge Financial Services, Inc. 444 Seabreeze Boulevard, Suite 825 Daytona Beach, FL 32118 c: 386-679-1963 e: firstname.lastname@example.org web: www.Homebridge.com/SteveLolli