Understand mortgage process when moving to Houston
Applying for a mortgage can seem like a daunting process for a first-time home buyer, especially if that home buyer also happens to be new to Houston. That means going through an unfamiliar process, while moving to an unfamiliar city.
And, unless someone intends on paying cash for a property, getting pre-approved for a mortgage is a necessary first step.
It lets them know whether or not they can qualify for a mortgage, and if so, what that dollar amount will be.
Richard Falgout, a broker associate with Berkshire Hathaway HomeServices Anderson Properties, said that he explains to his relocating home buyers the importance of having a pre-approval letter from a mortgage lender before looking at houses.
“For someone coming to Houston to buy a home, the pre-approval letter lets them know what they can actually afford, so that they can start looking in the right areas,” Falgout said. “If they find something they love, they can’t put an offer on it if they are not qualified.”
He said that when a buyer finds a house that they really love, but they aren’t preapproved, that they run the risk of the home being sold before they can complete the process.
This is because most listing agents expect a mortgage pre-approval letter to accompany the offer.
“If I’m listing a home and I receive an offer without a pre-approval letter attached, I’m not going to even consider it, because I don’t want to tie up the home that I am trying to sell only to find out a week later that the buyer can’t even purchase it because they don’t have the credit,” said Falgout.
Jennifer Hernandez is senior loan officer at Legacy Mutual Mortgage, and she said that the mortgage preapproval lets a seller know that the home buyer has been completely vetted out, and that all of the vital financial documentation has been provided and verified by the lender. This gives a solid overview of the buyer’s
financial picture.
Those documents and items typically include:
• Two months of bank statements
• Two years of W2 forms (for employees), or two years of tax returns (if self-employed)
• One full month of recent pay stubs • Photo ID • Copy of U.S. Visa (if not a U.S. citizen)
“The thing that I really pride myself on is making sure that we review all of the documents, and that the client understands that all pre-approval letters are not created equal,” Hernandez said.
She added that oftentimes home buyers don’t understand the difference between a pre-approval and a pre-qualification letter.
For the pre-qualification, the buyer submits an application and has their credit pulled, but none of the financial documentation is provided to the lender. Thus, the financial information is unverified.
As for the process itself, Hernandez said that she believes that a personal interview with the home buyer is the best way to understand their individual situation, and which mortgage program might best fit their needs.
“We do the interview either in person or on the phone, and it takes about 30 to 45 minutes,” said Hernandez. “I encourage buyers to do this, because this is how we find out and really fine tune which programs they might qualify for. There are many different programs, and people can get a false sense of security when applying for a mortgage online without a real human looking at their information.”
Then, once the home buyer has their mortgage pre-approval, they need to be aware of the critical factors that can negatively impact their credit. As such, there are some important things that they should and should not do.
“The things that will make your score go down the quickest, is maintaining a balance that is above 30 percent of your credit card limit,” Hernandez said. “So, watch your credit limits, because revolving credit is 30 percent of your credit score. Credit card usage or over usage, especially as the holidays are coming up, is a big no-no.”
Hernandez also said that home buyers need to be cautious about opening up any new credit accounts during this time.
“When your credit score is really strong, you can have a couple of inquiries, which is not a big deal, but when your credit is weaker, the inquiries and a new account is a big deal. When you get a new account, it does take points away from your credit until you can prove yourself again, even if you have good credit with all of your other accounts,” she said.
Additionally, she said that if someone changes jobs or their pay structure changes, that they need to notify their lender right away.
Lastly, Hernandez urges people to ask their lender plenty of questions, so that they feel really comfortable throughout the process.