The home buying process can be stressful. To make it a little easier on borrowers, it pays to get pre-approved for a mortgage before looking for a house to buy. Getting pre-approved will allow you a better chance of getting the home of your dreams and not losing it to other buyers before you get your loan situated.
Mortgage pre-approvals are basically a lender promising a borrower that they are qualified to borrow a mortgage loan up to a specific amount and for a certain interest rate. This promise is subject to certain requirements such as a property appraisal and no change in income. With a pre-approval promise from a mortgage lender, you will be able to secure financing for the home of your dreams.
What Is Pre-Approval?
When a mortgage company pre-approves your mortgage loan, they are saying they have confidence in you as a borrower and that you have the necessary money for the down payment and will be able to make your monthly mortgage payments. As stated earlier, the only stipulation a mortgage lender will have for approving after this point is that the property appraisal will need to show the property has sufficient value for collateral in relation to the amount the borrower is asking for the loan.
Steps To Getting A Mortgage Pre-Approval
Before trying to get a pre-approval, it is essential to check your credit score and reports. Doing this early on will help you determine the type of interest rates you will be able to qualify for. It can also give you time to correct any mistakes or errors on your reports before shopping for loans and homes.
The process for mortgage pre-approval is not too difficult. The lender will ask for some information and documentation including:
Income Information- When applying for pre-approval from a lender, you will need to be able to show proof of steady income. This can be done by offering tax returns, pay stubs or W-2s from the previous two years. You may also include income information from other sources such as retirement benefits, child support, and Social Security.
Asset Information- Your lender will want to see documentation supporting you have any other assets beyond income. This can include investments, savings accounts and gift letters from friends or family wanting to help you with the down payment.
Personal Information- To obtain pre-approval for a mortgage, you will need to offer the lender a valid form of identification such as a passport or driver's license. You will also need your Social Security number so they can run a credit check. You will not have to worry about bringing your credit report with you for the pre-approval process.
Why Get Pre-Approval?
If you are ready to buy a home or put an offer on one, both the seller and the real estate agent you are working with will want you to show proof of pre-approval from a lender. The pre-approval document will show everyone involved you are serious about the process and will be able to afford the purchase. The housing market is competitive and sellers prefer buyers who are pre-approved and better able to close on the deal without issues.