If you want to look serious to sellers when it comes to placing an offer on a house, getting pre-approved is the best option. You want to show them that you have the ability to buy the home and that you have taken the necessary steps to start the home buying process. Before you get pre-approved, you must get PRE-QUALIFIED. Pre-qualified and pre-approved are two different things. When you get pre-qualified, all the lender is asking of you is the very basic information needed to begin the evaluation process to see if you can get approved. By pre-qualifying, the lender can then tell you the amount of a loan you qualify for. After this step you may find a house and want to get pre-approved in order to put an offer on it!
What does the term “Pre-Approval” Mean?
Pre-approval simply means that the mortgage lender is assured that you can make a down payment for a home and that your income will cover the monthly mortgage payments of a specified amount. This step requires the lender to receive more detailed information about your financial background and current credit standing.
Why is it a good idea to great Pre-Approved?
Getting pre-approved allows you to have an advantage when you are dealing with a potential seller. This shows that you have the ability to afford the purchase of a home and can be taken seriously. In today’s market, houses are selling fast and receiving multiple bids on a home is extremely common, having that pre-approval letter can potentially lead you to the front of the pack. Another reason why it’s a good idea to get pre-approved is that you will know in advance how much you will be able to afford.
What all is needed for a Pre-Approval?
There are many things that you need to have available in order to get a pre-approval letter. Documents that are required include:
1. Pay Stubs
2. Bank Account Statements
3. Tax Returns
4. W-2 Forms from the previous 2 years
5. Any documents showing other sources of income
When you provide your loan officer with this information, the lender will issue a “loan commitment” after it has been approved for you and the home you intend to purchase. Then, your application will be submitted to an underwriter. They will then return the submission with one of four decisions: Approved, Approved with conditions, Suspended (meaning they need more documentation before they can make a decision) or denied. Once you get an approval from the underwriter, the process starts to move much quicker!