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You've got your heart set on that perfect place to call home, and now it's time to make it happen. But before you can start packing, let's talk about pre approval. It's like your VIP pass to the homeownership club, giving you the green light to make those offers.
Time to make things happen - Let's get it!
7 Reasons Your Mortgage Pre Approval Is Taking Time
Let's go through the seven common reasons why your mortgage pre approval might be taking its sweet time!
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1. Incomplete Documentation
Sometimes, the process slows down because there are missing or incomplete documents. This could include things like pay stubs, tax returns, or bank statements. Double-check to make sure you've provided everything your lender needs.
It's crucial to communicate promptly with your lender if any documents are missing or if there are delays in obtaining them. Proactive communication can help expedite the process and ensure that any issues are addressed promptly. Remember, your lender is there to help you get through the process, so don't hesitate to reach out if you have any questions or concerns.
Missing pay stubs or tax returns Absence of required identification documents Incomplete bank statements Unverified source of funds for down payment -
2. Credit Issues
Your credit history plays a significant role in the preapproval process. If there are any red flags on your credit report, like late payments or high debt levels, it could take time to address these issues and improve your credit score.
In addition, discrepancies or inaccuracies on your credit report might require further investigation and resolution, prolonging the pre approval timeline. It's essential to review your credit report regularly and dispute any errors promptly to avoid unnecessary delays in the preapproval process.
Late payments on credit accounts Errors on the credit report High levels of debt compared to income Recent bankruptcy or foreclosure -
3. Complex Financial Situations
If you're self-employed, have multiple sources of income, or are involved in other complex financial arrangements, it might take longer for the lender to verify your income and assess your financial stability.
🔎Find Out : How to choose a mortgage lender
This verification process can be particularly meticulous, involving thorough scrutiny of tax returns, profit and loss statements, and other financial documentation. Plus, the lender may require more extensive verification of your business's viability and stability, further contributing to the lengthier processing time.
Self-employment income verification Complex tax returns requiring additional scrutiny Multiple sources of income to verify Irregular income patterns -
4. Property Appraisal Delays
At times, delays occur due to issues with property appraisals. If the appraisal comes in lower than expected or there are concerns about the property's condition, it could slow down the preapproval process.
Also, if there are outstanding concerns regarding the property's title, such as liens or boundary disputes, it can prolong the preapproval process as the lender works to ensure clear title ownership, protecting both you and the lender from potential legal issues down the line.
Low appraisal value Discrepancies between appraised value and purchase price Property condition issues requiring repairs Delays in scheduling the appraisal inspection -
5. Additional Verification Requirements
Depending on your circumstances, the lender might need to verify additional information. For example, if you've recently changed jobs or opened new lines of credit, they may need more time to verify your employment and financial stability.
Besides, if you've recently relocated or have gaps in your employment history, the lender may require further documentation to assess your stability and ability to repay the loan. Be prepared to provide explanations and additional proof to support your financial situation during these verification processes.
Verification of employment changes Additional documentation for recent financial transactions Verification of recent credit inquiries or new accounts Explanation for large deposits into bank accounts -
6. High Volume of Applications
During busy periods, such as peak home buying seasons, lenders may be inundated with pre approval applications. This can lead to longer processing times as they work through the backlog of applications.
As a result, your application might not receive immediate attention, causing delays in processing. It's important to remain patient and stay in communication with your lender to stay updated on the status of your pre approval.
Increased processing times due to high application volume Longer wait times for application review and decision Limited staffing resources during peak periods Increased competition for available loan officers' attention -
7. Underwriting Process
The underwriting process, where the lender evaluates your financial situation and assesses the risk of lending to you, can also contribute to delays. This step requires thorough review and analysis, which takes time to ensure accuracy and compliance with lending regulations.
Moreover, the underwriting process may involve requesting additional documentation or clarification on certain aspects of your financial history. This back-and-forth communication between the lender and you can prolong the pre approval timeline as both parties work towards a comprehensive understanding of your financial profile.
Detailed review of financial documents Additional review steps for complex financial situations Compliance with lending regulations and guidelines Coordination with external entities such as mortgage insurance companies
The Share-Worthy Mortgage Preapproval Checklist
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Tax returns (including W-2s) from the past two years
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Bank statements from the past two to three months – checking, savings, money market accounts
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Credit reports and scores, retrieved by the lender with your authorization
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Employment information – contact information of employers in the past two years
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Driver’s license, Social Security card, or other form of ID
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Other income sources – bonuses, child and/or spousal support, disability or VA benefits, pension, Social Security or other sources
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Account statements from the past two to three months – 401(k)s and/or IRAs, CDs, mutual funds, or other investment or retirement vehicles
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Loan statements from the past 60 days – auto loans, credit cards, personal loans, student loans, and others
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Rental history – contact information for landlords and proof of rent payments
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Pay stubs from the past 30 days
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Business records if self-employed
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Down payment gift letter, if applicable
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Information on other real estate if you have multiple properties
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Recent residences and tenure at each
Preapproval and Prequalification Aren't the Same Thing!
Okay, let's straighten out a common misbelief: preapproval versus prequalification. They may sound similar, but trust me, they're not the same thing! Let's break it down in a way that's easy to understand:
Prequalification:
When you're prequalified for a mortgage, it's like dipping your toes in the water to see how it feels. Here's what it involves:
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Basic Info: You'll provide some basic information about your finances, like your income, assets, and debts.
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No Verification: There's no deep dive into your financial history at this stage. It's more of a preliminary assessment based on the info you provide.
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Estimates Only: The lender gives you an estimate of how much you might be able to borrow based on the information you've given.
It's like getting a sneak peek at what you could afford, but it's not set in stone. Think of it as the first step in the mortgage process, just to get a rough idea.
Pre Approval:
Now, pre approval is where things get a bit more serious. It's like stepping onto the playing field with your game face on. Here's what sets it apart:
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Verification: Unlike prequalification, pre approval involves a thorough check of your financial background. The lender will verify your income, assets, debts, and credit history.
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Conditional Offer: If everything checks out, the lender will give you a conditional commitment to lend you a certain amount of money.
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Stronger Position: With pre approval, you're in a much stronger position when it comes to making offers on a home. Sellers will see you as a serious buyer who's ready to make a move.
So, remember, while prequalification is a good starting point, pre approval is where the real magic happens!
If Pre Approval Isn't Happening, What's Your Backup Plan?
So, you've set your sights on pre approval, but sometimes things don't go as planned. Don't worry, we've got your back! Let's talk about your backup plan if pre approval isn't happening right away.
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➙ Assess Your Financial Situation
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Take a closer look at your finances. Are there any areas you can improve?
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Consider paying off outstanding debts or boosting your credit score.
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➙ Explore Alternative Lenders
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Look into different lenders who might have more flexible requirements.
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Don't be afraid to shop around and compare rates to find the best fit for you.
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➙ Adjust Your Expectations
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Be open to adjusting your budget or expectations for your dream home.
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You might need to consider properties in a different price range or location.
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➙ Consider a Co-Signer
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If your credit or income isn't strong enough on its own, consider asking a trusted friend or family member to co-sign with you.
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Just make sure everyone understands the responsibilities involved.
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➙ Save Up for a Larger Down Payment
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A larger down payment can sometimes compensate for other shortcomings in your application.
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Start saving or explore options for assistance programs that can help with down payment costs.
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➙ Work on Building Your Credit
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Focus on building your credit history by making timely payments and keeping balances low.
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Monitor your credit report regularly to catch any errors and address them promptly.
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📖 More Info : How To Save For A Down Payment
⏭️Read more: : How to build credit
Remember, setbacks happen, but they don't have to derail your homeownership dreams. Stay positive, stay persistent, and keep exploring your options. You've got this!