Helpful Steps To Take Before Applying For A Mortgage in Maryland

    A Step-by-step Guide to Preparing Your Finances for the Mortgage Pre-approval Process

    Being “pre-approved” for a mortgage isn’t just a way to get a step ahead, in most cases it’s a necessity for buying a home.  Many sellers don’t want to go through the negotiation process of selling their home only to have the buyer drop out when they can’t get approval for the mortgage they were relying on.  We’ve designed this blog to help assist in your efforts to be prepared for the home buying process, and handle it as efficiently and with as least amount of stress possible.

    • The Difference Between Pre-Qualification And Pre-Approval

    “Pre-qualification” is a faster process than “pre-approval” and is usually a best estimate based on how the borrower answers certain questions about their financial history and status.  It requires no thorough examination of pertinent financial documents, tax returns, employment history and/or verification, bank accounts, and even credit worthiness.  It cannot be 100% relied to start the home purchasing process, by the buyer, and should never be enough for a seller to accept an offer from someone with just a pre-qualification.

    “Pre-approval” is more valuable to a borrower than “pre-qualification” because it is a true commitment from a lender for a decided amount after they have completed an in-depth verification process based on the submitted documentation.  It also makes the seller more confident in accepting your offer

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    • Preparing For The Pre-Approval Process

    The majority of lenders will require the same documentation in order to pre-approve anybody for a mortgage, but there is more information they will need in certain cases.

    Anybody applying for a pre-approval will need to ready at least two years’ worth of financial information, including W-2s, Form 1099s and federal tax returns as well as current banking and financial records.  Usually the last 3 months bank statements, and any statements from retirement accounts or investments.

    Here is where the pre-approval process gets more in-depth, not only will the lender need to see how much money the applicant has in their bank, but they will also need to see proof as to where the money came from.  The lender will need to know the difference between income, gifts, or investment withdrawals to help them make their decision.  As the process moves forward, make sure to avoid any large or abnormal deposits into your account as they will be red flags that will then need explanation to the underwriter before final loan approval.  Also, most definitely avoid opening any new credit accounts, and NEVER buy a new car before checking with your loan officer first, and even if they say it’s “ok” still try to hold off if you can.

    Having your financial information ready in advance will speed up the loan process significantly, as will responding quickly to any requests for more information from your lender.

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    • Prepare Proof Of Assets And Allow A Credit Check

    Applicants will be required to prove ownership of all assets and will need a letter to prove that any cash gifts given to them to assist with the payment are not loans that need to be paid back.  This is important information that will help a lender make a decision, so having the letter ready will save a lot of time.  So when a family member is gifting you the money for the down payment, make sure it’s documented thoroughly.

    The lender will also need to check the applicant’s credit to compare it to the applicant’s income.  Many people refuse the credit check because they are afraid it will impact their credit score, but the impact is very low and the lender needs this information.  It is also a good way to learn about any errors in the credit report early, before they can pose a problem down the line.

    Any questions you may have regarding the home buying process and how to best prepare, turn to ExecuHome Realty, we can’t wait to help you realize your dream of home ownership.  Call us today at 443-632-3800, and start the journey today.

    ExecuHome is Maryland’s Own Real Estate Company and Home to OVER 350 Realtors!

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