Buying a home and getting pre-approved
It can be hard getting your dream house. But when you find your dream house, wouldn’t you like to land it fast? Not only that but also have your mortgage pre-approval letter before you set your eyes on the listing helps the process a bit faster.
You will need preparation and patience while getting pre-approved and stay on top of current mortgage rates. If you are competing with other buyers in a competitive market, getting pre-approved can give you much more credibility in front of your seller and fast-track the home-buying process. Based on the income and credit details of a borrower, pre-approval of a mortgage is a loan commitment written by a lender that a borrower would qualify for a particular loan.
Difference between pre-qualification and pre-approval
Before buying a home, many agents require getting pre-approved. However, pre-qualification and pre-approval are two different things and stages of the home-buying process. With pre-qualification, nothing is official about your eventual loan. You provide information on how much you can afford, and the process can be fairly fast. Whereas pre-approval is very much official process, although the process is not that fast but it worth it.
Why you have to get pre-approved
While there are different reasons for getting pre-approved earlier, the most important reason is you’ll get the idea of what you can afford. This will enable you to focus on homes within your budget.
Also, in a competitive real estate market, a pre-approval letter is essential because your offer will be considered important and handled more seriously in compare with other buyers without a pre-approval letter. Also, you can lose the chance of landing your dream house without a pre-approval letter.
How to get pre-approved for a mortgage
A lender is required to provide the pre-approval letter. The job of the lender is to define your loan qualifications and do a preliminary review. Your lender will also help you to build a financial picture by making necessary inquiries and requesting for necessary document.
Also, your lender will capitalize on your credit score, which can be influenced by the state of your debt—suppose you have any. Your credit and your mortgage – two things that go hand in hand. Typically, your lender may recommend you to pay off some debt such as few dollars balance on a credit score or your outstanding car payment before proceeding with the process so you can have higher chances of getting pre-approved.
Familiarize yourself with mortgage pre-approval requirements
You will have to tender the following before starting the approval process:
- You’ll need to provide your paystubs of at least 2
- Provide your W2-form of the last 2 years.
- Provide your Tax returns of at least 2 years.
- Your savings or checking bank account statement of the past 3 months—this may require you to have your down payment funds inclusive.
- Statements for several other assets such as retirements accounts, bonds or stocks for the past 2 months.
- Provide your current mortgage document. If you have a landlord, you’ll have to provide their name and phone number.
- If applicable, your divorce decree.
- Provide your 2 year business tax returns with your year-to-date balance sheet and profit and loss statement.—if you are self-employed.
