What are the Requirements to Get Pre-Approved for a Mortgage?

About Mortgage Pre-Approvals

The pre-approval process is the first step in securing a mortgage and involves reaching out to a lender before making an offer on a home. For members of the military community, this means providing detailed financial information in a mortgage loan application. A loan underwriter then reviews financial documents and commits to providing a loan up to a specified amount.

Reasons to Get a Mortgage Pre-Approval

Getting pre-approved offers many advantages, particularly for military families. Firstly, it accelerates the homebuying process. Instead of the typical 30-day closing period, you could close in as little as two weeks. This allows you to act quickly whenever you feel ready to make an offer on a home. The speed is important in a competitive market, giving you an edge over other buyers. That’s because sellers and realtors prefer working with pre-approved buyers since it streamlines the process and minimizes the risk of financial delays. A pre-approval signals to sellers that you are a serious and well-prepared buyer, boosting their confidence in the deal. Additionally, real estate agents can better assist pre-approved clients, ensuring that you only focus on homes within your budget.

Pre-approvals can also provide you with a clear understanding of your finances before you begin house hunting. That way, you will know exactly what you can afford and the terms of your loan, keeping you from wasting time on homes outside your budget.

Pre-Approval Review Process

For military families seeking a mortgage pre-approval, lenders review several key financial aspects. They look at your income, credit score, debts, and employment history. For the application, you will need to provide your last two pay stubs, the most recent two bank statements, the past two years of W-2s and tax returns, and documentation of your creditworthiness.

The credit check is more than just looking at your three-digit credit score (or FICO score). Lenders go through a complete review of your credit history, including the amounts owed, credit utilization ratio, credit mix, and any new credit activity.

Ultimately, stronger creditworthiness translates to better rates and terms on your home loan, helping you score a favorable mortgage.

About Minimum Required Down Payments

In the pre-approval stage, the minimum required down payment percentage is determined. It varies based on individual circumstances instead of following a set rule. However, knowing the standard benchmark can give you helpful information.

As indicated in the infographic above, FHA loans typically require a minimum down payment of 3.5%, a standard set by the Federal Housing Administration (FHA). This characteristic makes FHA loans appealing to many first-time homebuyers, offering lower down payment requirements and more flexible credit qualifications.

Meanwhile, VA loans distinguish themselves by not requiring a minimum down payment, thanks to their support from the Department of Veterans Affairs. This backing makes it easier for military members and their spouses to buy homes. By eliminating down payment requirements, VA home loans strive to overcome financial hurdles, helping veterans and their families to achieve homeownership.

Conventional loans, on the other hand, rely solely on the lender's requirements and specific loan terms. While the minimum down payment typically hovers around 5%, exceptions exist, such as reduced minimums for first-time homebuyers earning less than or equal to 80% of their county area medium income. Exceptions also apply for individuals who have not owned a home in the past three years.

Finally, portfolio loans sometimes don’t require a down payment because they are used by investors or borrowers with unique needs not fulfilled by other loans. Unlike conventional loans sold to investors, portfolio loans are kept by the lender. This lets lenders be more flexible, so they can finance more of the purchase, meaning you might not need a down payment.

Mortgages and Pre-Approvals at Armed Forces Bank     

At Armed Forces Bank, we understand the unique needs of military personnel and their families when it comes to homeownership. That's why we offer a wide range of resources tailored to support you through every step of your journey. Whether you're buying your first home, getting started with pre-approval, or just exploring mortgage options, our dedicated team is here to help you.

Make sure to utilize our online mortgage calculators, including a mortgage qualifier calculator, mortgage loan calculator, VA mortgage loan calculator and mortgage comparison calculator. These tools are designed to help you better understand your financial options and make the best decisions possible.

Ready to take the next step? Let our experienced mortgage team, who have a deep understanding of the unique challenges and opportunities encountered by military families, lead you towards achieving your dream of homeownership!

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Subject to credit approval. Qualification guidelines and restrictions apply with each loan product. Fees apply.