Pre-qualification, Pre-approval, and What You Need to Know

Both pre-qualifications and pre-approvals are indications of what a bank or creditor may be willing to lend but are not loan guarantees. The most important aspect is that they show the seller you are serious about buying while giving you an idea of what you may be able to borrow. Both processes will vary depending on the lender that you select. Before you request a pre-qualification or pre-approval, be sure to ask your lender about how the process will flow, potential associated costs, whether your credit report will be pulled and if documentation will be required. Ask for a list up front so you can know exactly what you’ll need to provide.

Pre-qualification

What: A letter from a lender that says you will likely be able to get a mortgage loan up to a specified amount

Who: A bank, credit union, or financial entity writes a pre-qualification for you. Which means they are looking at your debts and income to decide your credit worthiness.

When: Usually this is the first thing a homebuyer does when looking for a home

Cost: Free (usually)

Where: Online or over the phone (depending on entity)

Why: Potential homebuyers use this to see how much of a home they may be able to afford, or in some cases if they can afford a home. This appeals to sellers because it shows them as a buyer you are serious and can get the loan you need to purchase the home.

What you’ll typically need to provide: Usually potential lenders will look into your debts and income. Lenders usually pull a credit report to evaluate before they write the pre-qualification.

Pre-approval

What: A letter that tells you what a lender is willing to lend you based on financial documentation you provide. Looks at financial history, income, and stability.

Who: A bank, credit union, or financial entity works on a pre-approval for you. Which means they are looking at your bank statements, proof of income, credit, employment, and personal documentation.

When: Usually done right after a green light on a pre-qualification, the next step, some lenders may skip pre-qualification and go straight to pre-approval.

Cost: Varies (but usually a cost is involved for application)

Where: Online or over the phone (depending on entity)

Why: It’s more sound than a pre-qualification because approvals are based on proof of financial status and often evaluated by an underwriter. Can usually provide info about mortgage types and possible interest rates.

What you’ll typically need to provide:

  • W-2 from last 2 years (proof of income)
  • Bank statements (assets)
  • Credit score
  • Pay stubs (proof of employment)
  • Driver’s license
  • Social Security # (personal documentation)

Learn More About the Mortgage Process

Money in wallet

6 of My Favorite Spending Habits

There are so many great, accessible budgeting tools nowadays that can help with savings. Perhaps more rarely addressed is how to take those practical everyday steps that allow you to save, follow a budget, or understand your spending habits/ patterns and maintain them. I’ve compiled a list of my favorite smart spending habits that help me manage my money, in hopes that it can help you.

  1. Scheduling – I use my calendar as a guide to purchases. I use it to plan out holidays, birthdays, entertaining, vacations etc. in advance so I know what I’ll need to spend for each month, and I can budget out how much to spend. This is a great way not to be surprised by events, while also getting to be thoughtful about them in advance. I’m a big planner, so I love this habit. 
  2. Setting a goal or intention – Before I go shopping online or in-person, I always set an intention. I have a list, I know what I need to get, and I know around how much I can spend. This is a good habit to practice, as it helps keep me from impulse spending and encourages me to have a reason to shop instead of just for fun or out of boredom.
  3. Direct deposit into a savings account/ separate account that you only use in emergencies – Sometimes saving money is so hard to do manually, I just have to make it automatic. If you’re able to set up your direct deposit into different accounts – it can be a great way to save. Even if I only have 10 dollars from your pay going into a savings – that adds up. This also helps me be less likely to touch the money because it’s automatically accumulating without me doing anything.
  4. Have planned times of check ins – It’s easy to veer from my goals. Everyone needs that time of realigning. Checking in with my finances helps me see where I’m spending money the most, how much I’m spending, and see what my tendencies are. Check ins make all the difference because I can make small adjustments to help reach my saving goals.
  5. Cancel + update subscriptions – Subscriptions can be convenient; however, they can get out of control quickly. Regulating them helps me enjoy them for a while – then get rid of them at some point. There are always promotions on subscriptions, but they usually only last one month and then roll you into automatic payments. Beware of these and keep an eye out that they don’t enroll you.
  6. Think about big purchases for a while – Adding time to my purchase decisions can help me save money. Picking a price ceiling according to my budget helps me set the intention. Then I that number along with an amount of time. For example, maybe the ceiling is $150 dollars on non-necessities, and I think about the purchase for 4 days. This adds some logic to my purchase and helps me think out all the options before making an impact purchase.

Try These Saving Strategies!

I hope that the spending habits I practice can help inspire your own or keep going with the ones you’re already practicing well! Keep at it! 

How to Apply for a VMF Home

Applying for a mortgage can feel overwhelming, especially if you haven’t done it before. Vanderbilt Mortgage offers financing* on select homes on VMFHomes.com inventory. VMF has 3 main user-friendly application options that can help you feel at ease: over the phone, online; or paper/by mail. I want you to feel ready and prepared when filling out an application. Before you get started, here are some things you will need to have on hand for you and anyone else applying with you:

  • Social Security Number(s)
  • Current Email Address(es)
  • Gross Monthly Income(s) (generally the amount of money you have earned before your taxes and other deductions are taken out)

Over the Phone
Doing an application over the phone can help you feel more comfortable as you start the process. It can be helpful to have someone who is a licensed loan specialist to answer your questions as you go through the application. This option can also feel more convenient for some applicants.

You can call 1-866-701-0467 or when you are speaking with our sales team, you can request to have a licensed loan specialist take your application over the phone. Typically, we schedule these application times so that you can be prepared and know when to expect our call.

Online
If VMF offers financing for a listing on VMFhomes.com, you’ll see a green button in the lower right-hard corner that says, “Apply Now.” If you click that button it will take you to an online application. Make sure you have some time before starting and that you have access to your important documents. Remember, among other things, you’ll need social security numbers, email addresses, and gross monthly income for all applicants.

As you begin the application, you’ll notice that you were directed to VMF.com. You are now filling out an online application specifically for the home you were viewing. However, if you change your mind about that specific home, the application may be converted to use for another home. This is a simple process called a relook that does not impact your credit a second time. You may also fill out a general application that isn’t towards a specific home. Both a home specific and non-specific home application will give you the same results — a max loan amount you could qualify for.

Our online application is user friendly as possible so it can help you apply with confidence.

Paper Application by Mail
You can use paper applications to apply for any home listed on VMFHomes.com that Vanderbilt Mortgage offers financing on. One difference in the paper option versus the phone or online option is the increased time it takes to submit an application because of the time it takes the U.S. Postal Service to deliver the application via regular mail. Therefore, if you aren’t in a rush, or you simply prefer a paper application that you can physically write on – this might be the option for you.

Learn More About Mortgages

I hope this explains the different options you have for applying to Vanderbilt for a loan. If you have questions or want to make an appointment to fill out a phone application call 1 -866-701-0467.

*All loans subject to credit approval

Understanding How Your Credit Can Be Good News for Your Interest Rate

So you’re taking on a mortgage, or considering it – congratulations! Also, good job. Educating yourself in financial matters is super smart (though seriously daunting and intimidating sometimes). When it comes to interest rates, it can be easy to dismiss the steps you can take to try and get better rates. However, there are many things you can do before even applying for a mortgage to improve your ability to get a lower interest rate.

It begins with keeping the following in good standing: credit, debt, savings, income, and other assets.

Having a low interest rate is likely going to be important to you in the long run. While a high interest rate may be easy to overlook when purchasing a home, you may feel the financial impact of a higher rate down the road. A higher interest rate will result in you paying more over the lifetime of your mortgage2.

Good credit can result in lower interest rates when you go to purchase a mobile home2. Many people don’t realize how important it is to keep your credit score up or to work on getting into a good credit score range.

When applying for a mortgage or preapproval, it’s also a good idea to keep an eye on your credit report and to promptly correct errors1. You should avoid doing anything that may negatively impact your credit throughout the process of purchasing a mobile home; this includes applying for new, additional lines of credit1.

While your credit score isn’t the only key to a low interest rate, it is one of the key factors2. Your credit report is the main record lenders have of how you spend money. It tells them whether you pay on time, if you pay what is owed, and how consistent you are. It’s riskier for them to lend when your credit score is low in terms of your perceived ability to make payments. It’s similar to a school giving a better scholarship based on grades. While it’s not always fair to those who really have to work for a high grade versus those who are naturally good test takers – both got the same grade. The same is true with credit. If your credit has seen better days, you can improve it with hard work.

Another key factor is your debt1.  A lot of debt may deter a lender from lending to you, or may negatively impact the terms of the loan. Lenders calculate your debt to income ratio, so you definitely want to pay off as much debt as you can before applying for a home loan. Many people only see their home as an investment and not as debt, which it is. A mortgage is probably the biggest loan you will have in your life. Owning a home can be rewarding, but it is also a big responsibility. The best thing to do is either consolidate or pay off debts that you can, or at least have proof that you can consistently pay towards your debt while also making your mortgage payments.

Your savings and income may also impact your interest rate and the terms of our loan.  Starting to save is obviously amazing when considering a mortgage. It also can look good when your interest rate is being decided. Savings can demonstrate to a lender that you can pay your mortgage payments. This can also be shown if you have consistent income. Having a steady job or creating a savings budget could help you when trying for a better interest rate. Assets such as land, cash settlements, etc. could also positively impact that way that you appear to a lender.

Understanding your credit is the key to reaching for a better interest rate. Don’t just accept a high rate. You’ll pay for it later. Do what you can to make your credit shine!

Start Improving Your Credit Today!

  1. Consumer Financial Protection Bureau. 16 August 2018. How does my credit score affect my ability to get a mortgage loan? https://www.consumerfinance.gov/ask-cfpb/how-does-my-credit-score-affect-my-ability-to-get-a-mortgage-loan-en-319/

2. Consumer Financial Protection Bureau. 16 August 2018. Seven factors that determine your mortgage interest ratehttps://www.consumerfinance.gov/about-us/blog/7-factors-determine-your-mortgage-interest-rate/

Understanding What Makes Up Your Credit Score

Part of accurately building your credit is by understanding it. That begins with a breakdown of the factors that play into your score. The assumption by many is that credit is based solely on our ability to pay back money. While that is an aspect – it’s important to look at the collective.

Let’s elaborate on the 5 components of credit. Below we’ve got some examples to further help explain what each section means. These are made up examples and do not pertain to actual people or advice.

    1. Payment History: How well you’ve done with paying back your charges – based off consistency of repayment. Example: Debbie pays a little over her minimum payment before the due date. 
    2. Amounts Owed: How much you owe compaired your credit limit. Example: Debbie’s credit limit is $500 and she has a balance on her credit card of about $50 at a time. This is 10 percent of her limit, so her ratio of credit to amount owed is pretty low.
    3. History Length: How long you’ve had your credit. Example: Debbie has a credit card that she’s had for about 10 years. It shows over time how she’s used the card and done with making payments.
    4. New Credit: Based off opening new lines of credit. Example: Debbie opened a credit card, got a car loan, and opened a store credit card all in within two months. This could cause her score to drop.
    5. Credit Mix: Diversity and amount of credit lines. Example: Debbie has 5 lines of credit now: a department store credit card, a car loan, a secured credit card, a credit card through a bank, and a major credit card.

Check out This Credit Infographic

Source: https://www.equifax.com/personal/education/credit/score/how-is-credit-score-calculated

Debt Avalanche Versus Debt Snowball

Our society talks about the weight of debt, but there’s not a lot of talk about overcoming it. I’m here to add to the conversation. There are two great methods for paying off debt. Both options give you a bit of control, organization, and most importantly they help you see results. One is not   better than the other – what matters is how they may fit your specific situation and your perspective on financial wins.

So, when reading this think about your situation, and maybe it will prompt you to do some reevaluating. Both the avalanche and snowball method can help you start a journey toward financial wellness, without being overwhelmed.

*Keep in mind when looking at these methods that mortgages loans are not included. Not because they are not a debt, but because mortgage loans are long terms and can take decades to pay off and not everyone plans to stays in their home until the mortgage is paid in full.*

Debt Avalanche: repayment option that focuses extra financial resources to the highest interest rate debt payments first. Then it works down the line in descending order of debt interest rate. If you’re willing to be disciplined – this may be the perfect fit.

  • Pay the minimum required for all loans, use available funds to make extra payments to highest interest item first
  • Main asset: Helps you reduce some long-term high interest (lower overall
  • Main flaw: Doesn’t yield quick reward
  • Good for people with high interest loans

Learn More

Debt Snowball: repayment option based on paying minimums and paying extra on the smallest debt, then when the smallest debt is paid off, start paying off the next debt with the smallest balance.  If you need some motivation this can be a good option for you.

  • The idea is that while paying the minimum owed on all debts you also pay off the lowest balance debt quickly and then move on to paying more than the minimum on the  next smallest debt and so on.
  • Main asset: You can start knocking out small pieces of debt + see the results of your effort quicker
  • Main flaw: You end up paying more in interest (higher overall payments)
  • Good for people who need a bit of encouragement or a push to start

Learn More

My own method is to use both. When I began tackling my finances,  I only had student debt in the form of multiple loans. I used a mix of snowball and avalanche. I paid more than the minimums, and once I had the loans more manageable I started allocating additional amounts to higher interest loans within my collection of student loans. So, don’t feel limited you can use both as well!

Both options can be a good plan for anyone who needs to pay off debt but always consider your complete financial situation, including making sure you have an emergency fund for unexpected expenses and speaking with a tax or financial advisor about your individual financial situation. Taking the first steps can feel hard, but the reward is worth it. Which method better fits your situation? What first steps will you take?

Gearing Up for a Financial Spring Cleaning?

If you’re like me, you are gearing up for spring cleaning. Dust has piled up and the system you had going for organization may need a little extra attention. Have you thought of tidying up your personal finances? They deserve a good scrub, too! I get it – cleaning your home is a lot less intimidating and has immediate results. Yet, the rewards of creating a habit in which you check in financially can lend itself to long term progress.

Let’s look at ways you can spruce up your finances this spring.

  1. Pay towards your debt with your tax refund.
    It’s tempting to use your tax refund money on fun things or vacations. I’m not saying don’t do anything nice for yourself, but keep any debts you may have in mind. Could you pay something off with your tax refund? Want to cut back on some loan interest? It may be worth putting that money towards reducing or paying off a debt.
  2. Consider cutting back.
    With so many subscription services these days it’s easy to let them add up without realizing how much they are really costing you. Take inventory. Are there some you could get rid of? Could you share or split with a friend? Find a cheaper service or option? Making these changes makes you aware of expenses you may not have realized and helps you prioritize.
  3. Meal plan/ buy in bulk.
    There’s a lot of waste that happens in my house when I don’t plan meals ahead. Not just because I’m not buying in bulk, but because when I’m less precise I spend more. The old ‘take a list’ thing is real. Give your finances some love by getting the best deal you can when grocery shopping and stretching those meals/ingredients.
  4. Leave the credit card at home.
    I know, you’ve got that project, that thing you want, but making financial stability your priority is worth so much more than a moments satisfaction. Save up for those items so you can pay for them without adding to your debt.
  5. Have a spend free day/ weekend every now and then.
    Take a day to let the money sit still without being touched. You can still have a fun day! This helps us evaluate what we are spending money on and can be a wake-up call to bored or emotional spending. Get some spend free ideas here!
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Spend some time outside!
  • Outline a debt repayment plan.
    Just hoping that bills will go away isn’t reality. Like everything else, it takes work. So, take this time to get serious and make a plan to start chipping away at your debt. If you have a plan already – great job – tighten it up and adjust it, if needed.
  • Check on your emergency fund.
    Is it depleted, nonexistent? Work on making it priority again and give it a little TLC.
  • Have any other ideas? How do you spring clean your finances? I hope this has encouraged you to spend a little time digging in, and I hope that you see a return on your efforts.

    Get Tips on Reducing Debt

    First-Time Homebuyer Resources

    So, you’re wanting a place to call your own? That’s exciting! Have you done your homework? It’s going to take some preparation and research to purchase a home. We want you to be well-informed and encourage you to be your own advocate while researching and making home purchase decisions.

    We’ve gathered some resources and information about being a first-time homebuyer and have provided them below. While by no means all-inclusive, we’re  hoping these resources will help get you started!

    Young_Single_Lifestyle_Saltbox-30
    Homeownership is closer than you think. Get creative with your options!
    • You’re probably familiar with FHA Loans. Loans insured by the government, more specifically the Federal Housing Administration. FHA Loans generally require lower down payments but do require the payment of mortgage insurance premiums which protect the lender if a borrower defaults.
    • If you’re an active or previous member of the military, a VA Loan may be something to consider. Loans offered to credit qualifying veterans, or their surviving spouses if service and entitlement requirements are met. There is a VA loan no down payment option.
    • If you’re interested in living in a rural area as designed by the USDA Rural Guaranteed Housing Program: a USDA Home Loan may interest you. USDA loan programs are designed to improve and grow rural areas and you don’t have to have a farm.
    • If you’re interested in living in an energy efficient home, you might want to consider programs that finance energy saving home improvements as part of the mortgage. Some are offered to first-time homebuyers.
    • Lastly, check your local home loan options! Inquire with local lenders who know the area in which you would like to live for financing options. You might be able to find a local down payment assistance program, or other alternative program that fits your needs!

    Consider a Mobile Home!

    Still on the fence? Wondering what you’ll gain by being a homeowner? Check out these benefits of being a homeowner!

    6 Questions to Ask Yourself When Saving for a Down Payment

    Investing in a mortgage is a big step. It’s one of the biggest financial steps an individual will take in their lifetime. So it’s important to weigh it carefully. Don’t be discouraged by the size of the choice – instead be encouraged by the variety of resources you can tap into.

    Down payments will vary among lenders and in amount, depending on the loan program, type of loan, home price, credit score and budget. Below we’ve crafted some questions that will help you evaluate and analyze your ability to save for a down payment.

    shutterstock_404446555
    Be ready for your down payment by asking yourself these important questions.

    1. Is now the time for me to purchase a home? In a society that favors the word “now” over the word “later,” this question may seem silly. But it’s not. Purchasing a home means saving consistently, making payments, paying additional bills, maintenance responsibilities, and more. Check out listings near you and see what’s out there. If you aren’t in a place where you can save or you haven’t been saving. It may be time to wait. Be honest with where you’re at.

         2. What down payment can I afford? The possibility of purchasing a home is exciting. However, often our eyes are bigger than our wallets. It’s important to be practical. Consider how much you can pay out of pocket for a home. That may mean going with a cheaper home or being stricter with your spending.

         3. What monthly payment does my income allow? Simple. How much do you or your household make in a month? What will your house payment do to that number? If it doesn’t cover the cost now – it won’t later. Consider picking up odd jobs or making a bigger down payment, or trying the next question.

        4. What changes in spending do I need to make? Everyone needs to evaluate their spending before purchasing a home. Sometimes we need to prioritize the way we spend money. Leisure spending may not always be an option. If purchasing a home is a goal, consider how you can cut spending or alter your habits.

    Get Savings Tips Now!

        5. What method will I use to save money? Automatic saving accounts are the most widely recommended method of saving. Usually free, they can be drafted from your pay without effort from you. Banks sometimes have programs for first time buyers or you could invest. You could even try putting a dollar or change in a jar or bucket every day and depositing it every so often.

         6. Do I need to ask for lower rates? If you’ve tried everything above and you still need some wiggle room – evaluate you bills. Are you paying high interest rates on credit cards? Has your car insurance been the same for a while? Consider calling and asking for lower rates. This could put more money in your pocket.

    Congratulations, you’re doing your research and preparing well! Are you ready to start saving or do you need to work on one of these questions?

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