Do Not Be Bullied by a California Mortgage

Your California home will be the single most important investment you can purchase. However, getting approved for a California home loan can be stressful, complicated and time consuming. And unfortunately, due to declining house prices in many parts of the country and the reluctance of some lenders to lend money to buyers, obtaining a loan is even more difficult today than it has been in the past.

It is important that California home loan applicants know that there is a difference between being pre-approved for a mortgage and pre-qualifying for a California home loan. Being pre-qualified simply means that you have a statement from your lender verifying that, based on a preliminary credit check, you should be able to qualify for home financing. Being pre-approved means that your information has actually been verified and that you have an underwritten approval for the loan that you are requesting. This is an important difference, as some sellers will not accept an offer from a buyer who has not been pre-approved; some realtors will not work with a buyer who has not been pre-approved.

Being pre-approved for a California home loan will also give the home buyer an accurate idea of their borrowing cap – and how much house they can afford. A pre-approved California mortgage should also have a guaranteed interest rate. Other than the obvious advantages of being pre-approved, in some places, only around 10% of potential buyers are pre-approved. So, this strategy can prevent you from buying the home of your dreams.

There will be a good deal of paperwork to complete in order to apply for and be approved for a home loan. Typically, your lender will expect to see your last few pay stubs, or a profit and loss statement if you are self-employed; as well as your tax returns from the last two years. To gain an idea of how reliable you have been at paying bills in the past, your lender will also pull a copy of your credit report. Your credit does not need to be perfect to be approved for a California mortgage, but a good credit score means that lenders will probably offer you better terms and lower rates. If your credit score is below 630, then you are considered a higher risk, and can mean that your monthly mortgage payments will be anywhere between $50 and $250 higher. It may be advisable to consider trying to improve your credit score and even waiting a year or two before buying a home in California.

Another important financial consideration for loan specialists is a stable work history – ideally at least 6 months continuous employment with the same employer. A lender will also look at your income to debt ratio, to make sure you can actually afford to pay the monthly amount. Of course, at this point you should have a fairly good idea of what you can afford anyway. Any large outstanding debt that can be paid off will give you a better income to debt ratio, so try not to make a big purchase right before applying for a California home loan, because your credit score will lower as a result.

Finding the right lending agency is a vital part of the getting approved for a California mortgage. It´s a good idea to compare the fees that you will incur with your application to the overall service provided. Try to get an understanding of the lender's experience and business practices. One of the best ways to find the right lender is simply to ask friends, family and co-workers for their recommendations.

Choosing a mortgage broker is often the best way to go because they have a great understanding of the California home market, but make sure they are licensed in California and check if they are affiliated with any associations. In today´s competitive housing market, a mortgage broker knows of the best loans available for different home buyers and are more familiar with the California home market. A larger national lender has very limited home loan programs, and they will never tell you that their competitor has a loan program that would suit your needs perfectly, while a mortgage broker will. Once you have been approved for a home loan, then the fun begins - good house hunting!