Get Approved to Shop for a Home
Pre-Qualified
- Fill out a loan application.
- Have your credit report reviewed.
- Talk to a loan officer who will provide a free pre-qualification letter.
The letter lets the seller know you should be able to afford the house.
Pre-Approved
- Fill out a loan application.
- Have your credit report reviewed.
- Submit supporting documentation on income and assets for review by a lender.
The loan officer will provide a free pre-approval letter. It takes an extra step, but sellers prefer an offer from a buyer who is pre-approved.
At Carolina Home Mortgage, we work for you, not the bank, and we work with many lenders to compare rates and types of loans. Even if you get a pre-qualifying letter from another lender, you can still ask us to do a rate quote comparison.
Go Shopping
Before you go shopping for a home, you must get either pre-qualified or pre-approved. Both mean you are a serious shopper with sincere intent to purchase. Letting the seller know you are approved improves your chances of buying the home. Most lenders offer the service at no charge and are happy to send you a copy of your credit score for your review.
Sometimes you may be competing with another buyer in making an offer on a home. A pre-approval letter is stronger than a pre-qualification letter. Learn how much competition you will have to buy a new or existing home. Then, get in touch with one of our loan officers.
Do I Have to Pick Out a House?
You do not have to find a house first. Go ahead and get pre-qualified. You will learn how much is a reasonable amount to spend and go home shopping with an amount in mind. Once you want to make an offer to purchase, you will want to have a pre-approval letter. Just let us know the address, and we will prepare your free pre-approval letter on the spot.
Do not get a letter with the dollar limit included! You don’t want the seller to know how much you have to spend. Get a letter saying that you are qualified to buy a house at a certain address, without stating a dollar amount. Only you know you are within the limit.
Employment
You share your two-year work history by providing W-2s from your employer if salaried; 1099s from employers if you are a contract worker; or tax returns if self-employed. If you recently changed careers, then we need to see how stable your new job is in deciding if you qualify for a loan. A strong borrower is one in the same job or in the same field or line of work for at least the past two years. If you recently graduated from college and started a new job, do not worry. Being a college student may count toward your two-year work history.
Salaried Employees
Salaried employees will receive a W-2 from an employer. Lenders typically look for at least two years of continuous employment or income stability. This doesn’t necessarily mean you need to have been with the same employer for two years; you may have changed jobs as long as you’ve remained in the same line of work or industry.
Salaried to Self-Employed
If you recently switched from an employer paying you a salary to being self-employed, then you have to provide at least one year’s federal tax returns to prove you have self-employed income, a YTD profit and loss statement, and possibly three recent monthly business bank statements.
Self-Employed
If you have been self-employed in the same field for at least two years, you should have no trouble getting a mortgage, especially if you have filed two federal tax returns. It is important that you have been so for the past two years. If you recently changed jobs but stayed in the same field, that is fine. If you have been in the same line of work for the past two years and filed at least one tax return as a self-employed individual, you may still be eligible. For a quick answer, send your personal and/or corporate tax returns to a loan officer.
Contract Workers
As a 1099 contract worker, you’ll need to provide documentation of your income, such as tax returns (usually for the past two years) and 1099 forms. Lenders may also ask for profit and loss statements or bank statements to verify your income. Lenders prefer to see a consistent income stream over time. If your income fluctuates significantly, lenders may average your income over the past two years to determine your qualifying income.
Credit Score
Maintaining your credit score is critical. A credit score is a number value that describes how well you have paid your rent and your bills, including your credit cards, home, auto, and other loans. Borrowers with the highest credit scores get the best loan rates. Borrowers with the highest credit scores get to borrow more money. This holds true whether purchasing a home, a car, or an appliance. Borrowers with the highest credit scores get the lowest interest rates as lenders compete for their business.
Your credit score ranges from a low of 300 to a high of 850. The largest credit-scoring agencies, Equifax, Experian, and TransUnion will give you a free credit score every 12 months. You will need your social security number, your name and birthday, and your address. Go to annualcreditreport.com to get one. Also, your credit card company may give you a free credit score. These sources are more reliable than other free reports.
Residential Mortgage Credit Report
For a home loan, you need a tri-merge score or a residential mortgage credit report (RMCR). A tri-merge score includes the scores from Equifax, Experian, and Transunion. The RMCR report and your Credit Karma score are not ever the same. Usually, the report we use will show a lower score. The lower score does not matter much if you have a score of 780, but if your free score is 625 and our free RMCR shows 575 that is the difference between getting a mortgage and not getting a mortgage!
What If I Already Own Another Home?
If you are thinking of selling your house or have an existing home for sale, we make sure you can pay both your current mortgage and your new mortgage. If so, you can offer to buy the new home with a non-contingent offer. A non-contingent offer means you do not have to wait to make the purchase until you sell your current home. Conversely, you can make an offer contingent upon your selling your existing home, but that is riskier for the seller.
What If I Filed for Bankruptcy?
If you have a bankruptcy on your financial record as little as two years ago, we may still be able to help you get a mortgage to buy a home.
What If I Am Separating?
If you are getting divorced or separated, please call us to discuss your options. We share the guidelines concerning when and how alimony and child support can be used as income. The guidelines vary greatly depending on the type of residential mortgage.