Even though rates arestill low, in Orion’s pipeline we’ve definitely seen an increase in borrowerspurchasing homes. Yes, inventory is low, and as we enter the last weeks ofDecember, we realize that it is the traditional slow season for home buying.But in many areas, there continue to be motivated sellers, and good buys to behad. And with home buyers comes the need for borrowers to be “pre-approved” bylenders in order, in some cases, to compete with other potential buyers.
For clients having a hardtime finding a new home, the first adjustment brokers tell them to make is tobe pre-approved – which some lenders and real estate agents believe is ofcritical importance. There are three main factors that determine a home buyer’spurchase price, loan amount, and type of loan: income, credit, andcash. Typically one of the three areas is the limiting factor for loanqualifying, and therefore purchase price, so borrowers being pre-qualified, andmore importantly pre-approved, before writing that offer will avoid a lot ofheadaches, heartaches, and disappointments. Orion’s brokers are good at settingexpectations.
To be pre-approved, aborrower first needs to contact a solid broker. Second, your client should beprepared to provide all the information and documentation needed to properlyevaluate the current financial status and be able to accurately providemortgage amounts and options for a maximum purchase price based on capability. Thisincludes the most recent paystubs, prior years federal tax returns and W2s, mostrecent statements for all asset accounts (checking, savings, investments,retirement accounts), residence address(es) for prior two years, employmentinformation prior two years for all jobs (name, address, dates of employment,position, salary/commission/bonus), and birth dates.
With this information abroker will run a credit report is run that includes all three credit agencies(Experian, Trans Union, Equifax) to obtain not only current credit scores butalso to have what debt is currently listed. An underwriter will put thisinformation through the Automated Underwriting System for either Freddie Mac orFannie Mae (the preferred AUS for government and most jumbo loan programs aswell). The AUS will let us know if we have official credit approval or not. Ifit is a jumbo or other non-Agency loan, Orion’s underwriter will manuallycompare the credit attributes against investor requirements.
At that point borrowersand brokers will discuss purchase prices, loan program, loan amount & downpayment combinations, future plans & possible changes during the next 3-5years. The lender stands by to write a letter of pre-approval to the realestate agent and the one representing the seller. But as noted, the borrowershould start with a discussion with a trained broker.