The first step in the home buying process should always be to get pre-approved. This will help make sure you qualify and give you an idea of how much you qualify for.

Pre-Qualification is given using stated information, whereas a Pre-Approval is verifying the basic information of Income, Credit and Assets. Loan files are also submitted through either a live underwriter or an Automated Underwriting System (AUS). While Pre-Approval is a little more time consuming, it is much more beneficial. Also, many sellers require pre-approval rather than a pre-qualification. To get the most confidence in your qualification, ask your Thrive loan originator about our Verified Pre-Approval program.

Underwriting requirements can vary based on the lender, loan program and borrower specifics, but typically lenders are looking at:

• Income/Debt ratios: This helps determine a borrowers ability to repay the loan.

• Assets: Lenders look at assets to ensure adequate funds for closing are available, as well as any reserve assets that may be required.

• Credit: Credit reports and credit history are reviewed in depth to ensure positive payment history on other debts.

• Collateral: Lenders will typically require an appraisal to be completed to ensure that property value and condition meet their lending requirements.

Employment, pension, retirement, Social Security, child support, alimony, dividend, etc. can all be used for qualifying. All income sources must be documented and many require evidence of continuance, so it’s best to work with your loan originator to best understand your specific scenarios requirements.

Many loan programs allow for gift funds to be used toward down payment and closing costs. Typically, the gift donor must be a relative or significant relationship.

Home owners refinance their property for many reasons. Typically, a rate/term refinance would be used to lower the interest rate or reduce the remaining loan term, which can save thousands of dollars over the life of the loan. A cash-out refinance uses the properties equity to consolidate debt, make a large purchase or just put cash in the bank.

Many borrowers can benefit from a term reduction, as it saves thousands in interest over the life of the loan. Just keep in mind that your monthly payment will typically increase, sometimes significantly. Make sure to budget for the unexpected and remember that you can apply additional funds to principle monthly, or make bi-weekly payments, both of which will help pay off the loan faster and save you money on interest.

Typically with a Conventional mortgage product, the maximum loan-to-value ratio of the cash-out refinance cannot exceed 80%. Other programs are available, so speak with your loan originator to find the best loan program to meet your needs.

While both options provide value, it’s best to meet with a loan originator you trust to do a deeper dive into the pros and cons of each program. From there, you’ll be able to weigh your options carefully and decide which is best for you scenario over the long and short term.

Each loan program has different requirements around appraisals. Typically appraisals will be required for cash-out refinances, and in some cases even a rate/term refinance will require an appraisal to be completed. Either way, while there is an expense to having an appraisal done, it ultimately helps to better understand the market value of your home and opens the door to other options once the value is known.