If you're in the process of looking for a new home, and you've gone through the pre-approval process, you're not out of the woods yet. Many people wrongly believe that once they receive that pre-approval, they are guaranteed that home loan. Unfortunately, there are still some things that can sabotage the final loan approval. If that happens, you'll be back at square one, without the home loan. Now that you've got the pre-approval, here are three steps you need to follow to ensure your loan is officially approved.
Keep Track of the Provisional Issues
When it comes to pre-approvals for home loans, they usually come with some provisions. Unfortunately, many people don't pay attention to the provisional issues, which ends up causing problems for the final approval. These provisional issues are items that the lender will want to address before the loan is funded. Some issues that the lender may want to address will be gaps in your employment history, or where the cash is coming from for your down payment. However, there may also be other provisional issues that will need to be addressed. If you're not prepared to address those issues, you could end up losing out on the approval.
Don't Max Out Your Housing Limit
When you receive your pre-approval, it will come with a cash limit. You may think that the cash limit is the maximum amount you can purchase a home for. For instance, you may think that a pre-approval for $250,000 means that you can buy a $250,000 home. However, that's not necessarily correct. The pre-approval is based on what the lender believes you can afford as a total monthly mortgage payment, including HOA fees, insurance, and taxes. If you max out your housing limit, and then HOA fees are added, the lender may deny your loan application based on the increased monthly payment. To avoid problems, try to choose a home that comes in under the actual amount that you've been pre-approved for.
Be Aware of the Five Cs for Loan Approval
When your lender sits down to make the final loan approval, they'll be re-assessing your application. At this point they'll be looking at five specific criteria, or the five Cs. Those five Cs include the following:
Capacity: your ability to make those monthly payments
Character: your history of making your payments on time
Capital: the liquid assets you're bringing to the table
Collateral: the actual value of the home you want to purchase
Compliance: the loan meets the lenders requirements
Now that you're ready to buy your new home, don't lose out on the pre-approval. The tips provided here will help you ensure that your pre-approval turns into an approval. For more help, contact a company like Unison Bank.