Although this is “step 8”, we start this process as soon as you get an accepted offer. When you have an accepted offer, you will normally meet your loan officer within 2 business days to start the loan application.
Getting your loan approved is step 8 because we usually don’t have to worry about the loan as much until we’re sure we want the house after the home inspection, etc.
If you are buying a home with cash, you can skip to: Step 9: Home Warranty
What should I prepare?
Your loan officer is going to ask for certain documents to get the loan approval process going.
A few of the items your loan officer will ask for are:
- Your most recent 1 month of pay stubs (if applicable)
- Your last 2 most recent bank statements
- The last 2 years of w2’s or other reported income documents
- The last 2 years of tax returns
Once they get all the documents and you sign off saying you want to apply for the loan, they will start a process called “underwriting.”
What’s underwriting?
Underwriting is the formal process by the lender for double checking everything they need to approve the loan.
Below are a few of the major factors that your lender will consider before approving or rejecting your loan application.
- Appraisal: An appraisal is basically a licensed person checking the sales value of your home. They do this by comparing the recent sales data of similar homes in the neighborhood or within 1 mile. For more on appraisals, please see my article here.
- If you are using a loan, you will eventually need to schedule the appraiser to go out and estimate the value of the home. This is required to be done before getting your loan approved. If the appraisal value of the home is too low, the loan may not be approved.
- Credit: The lender/loan officer will double check that your credit score still qualifies for the loan.
- Debt payments: The lender/loan officer will also ensure that you can afford your new mortgage payment. If you have too much debt and monthly payments, you may not qualify.
- Income: The lender/loan officer will double check that you have made enough income and will continue to make enough income to qualify for the loan.
- Down Payment: The lender/loan officer will check if you’ve had your down payment amount saved for at least 2 months in your bank account. This also applies to gift money from family. Before moving money around between family for the down payment, I highly recommend talking to your loan officer. Usually it’s best for your relative to keep the money in their own account and wire it directly to the title company when you’re finishing up the sale.
- Quick Note: Don’t hide all the money in cash in your house just before you want to buy the home. They won’t allow that money to be used for the down payment.
It seems like a lot to remember, but your loan officer should walk you through all of this. No need to remember the specifics of this stuff on your own.
I am not a loan officer, so before you take this information as gospel, please talk to your loan officer.
In general, if you have any loan related questions during the purchase process, please consult your loan officer. But I hope this article helped with clarifying any major questions you had about this part of the purchase process.
Ready for the next step? Click here: Step 9: Home Warranty
Need to go back a step? Click here: Step 7: Reviewing HOA Documents
Want to start from the beginning? Click Here: Step 1: Setting Up Your Wallet
Thanks for reading! If you think this information is useful, please share it with a friend!
Leng Lim
Las Vegas Real Estate Specialists
702-343-2670