Get Pre-Approved for Your Home Loan Before you Go House Hunting
Are you aware that there is a big difference between a home buyer being pre-qualified and a buyer who has a pre-approved mortgage? Just about anybody can get pre-qualified for a loan. Getting pre-approved means a lender has taken a more in depth look at your financial information and they’ve let you know how much you can afford and how much they will lend you.
Being pre-approved will save you a lot of time and energy since you are not running around looking at houses you can’t afford. In a competitive housing market a serious buyer should pursue a pre-approval from a lender in advance of beginning a home search.
A pre-approval is generally a written statement from a lender stating the lender’s preliminary determination that a borrower would qualify for a particular loan amount under that lender’s guidelines. The determination and loan amount are based on income and credit information. Most pre-approval letters are good for 60 to 90 days.
Generally the documents you need to get pre-approved are the same documents that you would need to get a mortgage. That includes most recent pay stubs, two years’ W-2s, last two federal tax returns, two months’ of bank statements of all types of accounts and your credit report. A pre-approval is not a loan commitment, but it helps speed up the underwriting and loan approval process.
The pre-approval process also gives you an opportunity to look at your credit score and determine if you need to fix any unexpected errors on your credit report. A credit score difference of 700 to 680 can severely affect one’s ability in terms of down payment.
A pre-approval letter also helps you prove to real estate agents and sellers that you’re a credible buyer and able to act fast when you find the home you want to buy. Some sellers might even require buyers to submit a pre-approval letter with their offers. A pre-approval letter can make you stand out in a competitive real estate market. If you make an offer on a house without a pre-approval, your offer may not be taken as seriously as an offer from another person with a pre-approval.
While none of the pre-approval process is as interesting as attending an open house, it is an important part of the home buying process. You can avoid a lot of disappointment and confusion by starting your home buying journey with a pre-approval.