Here's How To Get Mortgage Pre-Approval
Perhaps one of the most important steps you can take in the home buying process is obtaining a mortgage pre-approval. When you get a mortgage pre-approval, it not only shows the seller of the home you want that you are a serious contender, it also can give you the confidence you need to make your purchase because you’ll know how much you qualify for and have a good idea of how much home you can realistically afford.
Many buyers mix up a pre-approval and a prequalification letter for their mortgages; the difference is pretty important. A prequalification letter is a surface “ok”, essentially. Lenders will take a brief look into your financial situation and credit history, and give you an estimate on what mortgage you qualify for, how much mortgage you qualify for, and if there is anything you need to do to prepare for a mortgage. A pre-approval letter is when a lender looks at your financial situation, documents, and credit history in depth; they will get to know your personal finances inside and out during this process. The good news is, if you qualify, they will give you a letter stating that you do and that they intend to give you a loan. This can really help you snag the house of your dreams, especially in a competitive housing market where multiple offers may come in.
Below, we’ll discuss some tips on how to get a mortgage pre-approval from a lender you’re considering using.
Familiarize Yourself With Your Credit
The mortgage lender will definitely be pulling a credit report on you; however, it’s important that you are familiar with your credit situation prior to attempting to get a pre-approval. Pulling your credit report beforehand will allow you to see if there are any problems that need to be corrected, give you a chance to increase your score by paying debts off or fixing issues, and to know which types of mortgages you may qualify for based on your FICO credit score.
Shop Lenders
Going through the preapproval will give you the important opportunity of being able to shop around with different lenders. You don’t want to put all of your eggs in one basket when it comes to securing a loan as large as a home mortgage. All lenders are different and will be able to offer you different perks, and will have their own setbacks, so going through the pre-approval process can give you the chance to determine which loan and company are right for you and your unique financial situation. Try to compare at least 5 lenders during this process.
Documentation You’ll Need
As noted before, any lender you are considering for a loan will need to know your financial situation inside and out. Because of this, you’ll need to have a barrage of documentation ready for their review. Here is a list of what you’ll need:
- Your W-2 copies
- Most recent year’s tax returns
- Copies of most recent 2 pay stubs
- Information on any additional income, such as rental, alimony, child support, etc.
- Most recent bank statements
- Most recent copies of statements on savings
- Most recent copies of statements on any IRA’s or investment funds
- Letters from anyone who gifted you down payment money stating money is not due for repayment
- Divorce paperwork, including any child support or alimony you pay
- Debt information, including account numbers and amounts
- Social security number, passport, and driver’s license
Be sure to be as honest as possible about everything and to be thorough with all documentation you provide. Your lender will see if you leave something out, and it won’t help your cause if you are dishonest - it could put you into the wrong mortgage for your budget and financial situation.