Once you’ve found a Realtor to represent and advise you on what is going to be the biggest financial transaction you ever make, Step 2 to buying a home is to get pre-approved by a mortgage lender. As a Realtor, I won’t put an offer in on a home for a client unless they have been pre-approved. In addition, it’s important that you have an understanding of how much you can comfortably afford to spend on a home, what your monthly payments will be, what interest rate you qualify for, and how much you’ll be paying each month in taxes. Here’s a great booklet that demystifies the mortgage process, which I highly recommend all buyers read before applying for a mortgage.
Having a good mortgage lender is a crucial part of ensuring a smooth transaction. Working with a bad mortgage lender can make the process a nightmare for everyone involved and put your purchase in jeopardy of not closing on time or at all. You also might end up regretting the lender you chose for years if you end up paying a higher interest rate than you should have if you had shopped your loan through various lenders. You could also lose out on your dream property because your mortgage lender was disorganized and couldn’t get you fully approved during underwriting, etc. That’s why it’s important to work with the best.
Recommended Lenders:
Danny Shaw
Whitefish Credit Union
406-863-3929
dshaw@whitefishcu.com
Barry B. Conger
US Bank
406-250-6100
barry.conger@usbank.com
Katie Williams
First Interstate Bank
406-406-210-2181
katie.williams@fib.com
Darel Handley
Grizzly Home Loans
406-890-8464
darel@grizzlyhomeloans.com
Lindsay Kinniburgh
Cross Country Mortgage-Kalispell
406-890-4535
lindsay.kinniburgh@cccm.com
Ed Nissen
Cross Country Mortgage-Whitefish
406-261-9223
ed.nissen@ccm.com
Paperwork You Need To Gather
Each lender has slightly different requirements regarding what documentation they need from you for the pre-approval process, but in general, expect to provide the following items:
- A completed application (The lender will provide this to you directly)
- The two most recent months (or a quarterly statement) of any asset information listed on the application. Generally, the lender needs checking, savings, 401k, mutual funds, individual stock accounts, IRA’s, brokerage accounts, etc.
- Past two pay stubs if you are a W2 employee
- Past two years' worth of W2s (i.e. 2023 and 2024 W2)
- Past two years' worth of US Tax Returns (ie. 2023 and 2024 Federal Tax Returns)
- Past two years' worth of Corporate Tax Returns (if self-employed and you own over 25% of the company)
Getting a Pre-Approval Letter
Generally, once you submit the above items to your lender you should receive a pre-approval letter within 2-3 business days. The lender may ask for additional documentation. They are not trying to be difficult by asking for additional documentation, rather, after the housing bubble burst, underwriters became much stricter regarding the loan approval process so a lot more documentation is needed today than years ago. In addition to receiving a pre-approval letter which shows the amount you can afford to purchase, you should ask your lender to show you what that pre-approval amounts to in terms of a monthly mortgage payment plus any private mortgage insurance (PMI), taxes, and insurance. That way you can make sure you are comfortable with what your monthly housing payment will be at that pre-approval letter. Once you’ve received your pre-approval letter, forward it to me for your file so I can have it when we are ready to submit an offer.
Get a Loan Estimate and Understand Your Closing Costs
In addition, mortgage lenders are required to provide you with a loan estimate (LE) within 3 days of receiving your pre-approval. The LE provides an estimate of the closing costs you’ll need in addition to your down payment and shows exactly what fees the mortgage lender is charging you. Make sure you understand these fees. Generally, we estimate closing costs to be approximately 2.5% of the purchase price of the property. Here is a chart showing approximate closing costs in the Flathead Valley. Your mortgage lender can provide you with more detailed estimates based on your exact pre-approval price. Remember, these closing costs are due at closing (except for the appraisal and inspection fees which are due on the day those services occur) and are on top of your down payment. For example, if you’re buying a $500,000 property and putting down 20% toward the loan you’ll need to have $112,500 cash available at closing ($100,000 for your down payment and approximately $12,500 for the closing costs).
Should You Shop Your Loan Around?
Absolutely. Every lender charges different fees and different interest rates so it’s crucial you shop your loan around to at least two lenders, in my opinion. I recommend having the lenders all pull your credit on the same day though. Each lender will need to pull your credit report in order to give you an accurate pre-approval letter. If your credit is pulled by various lenders on the same day or within a day of each other it will have much less impact on your credit than if you have it pulled by various lenders weeks apart. Also, if you're going to compare interest rates, make sure you are comparing interest rates between lenders on the same day as rates vary, even over the course of the day. So if you aren't comparing interest rates on the same day, it's like comparing apples to oranges.
Questions about the pre-approval process? Just call me at 406-250-7506 or email me at jbrown@glaciersir.com.
