However, going into it blindly can lead to a less than pleasant experience, not to mention possibly losing your earnest money, not getting the home you want, or worse. Believe me, we've seen a lot of things happen to uninformed, or ill informed buyers. We don't want to see that happen to you.
In order to obtain a full Pre-Approval, your lender is going to need a number of things, divided into three categories.
IDENTIFICATION
* Driver's license or U.S. passport.
* Social Security card or number.
* If you aren't a U.S. Citizen, a copy of both sides of your green card(s).
* Employment verification. The lender will need to know if your employment is stable. They will, most likely, contact your employer(s) and inquire about your employment and yearly income.
INCOME
* Pay stubs covering the last 30 days if you are working hourly or salary.
* The last two years W-2 or 1099 forms depending on your employment.
* Proof of additional income, if any.
* Federal income tax returns for the last two years with all pages and schedules.
* Business federal tax returns for the last two years with all pages and schedules. (if applicable)
ASSETS
* Bank statements proving you have enough funds to cover the down payment and closing costs.
* A gift letter if someone is helping you with funds to purchase the home. The letter must state that the funds are a gift and are not expected to be repaid.
* The last quarterly statements for financial accounts, including IRA, 401(k), mutual funds, and stock accounts.
Assuming you have all documentation ready, it's possible to get pre-approved on the same day you submit everything to your lender.
Lots of debt, a history of previous foreclosures, and low credit score(s) can slow down the process, however. Depending on what the issues are, it could slow down the pre-approval process from a few days to several months.
Providing the lender with all requested documents and not hiding anything, is the only way to speed up the process.
Pre-approvals don't last forever. Changes to your income, credit history, and/or interest rates can invalidate your pre-approval. As a rule of thumb, and depending on the lender, your pre-approval will last for 60-90 days before you will need to update your documents to get a new pre-approval letter.
Once you are pre-approved, you will receive a letter from the lender you can include with your offer. The letter indicates to the seller that you have already started the loan process and that the lender is willing to work with you. It provides the seller with peace of mind that you could actually afford to purchase their home.
If you haven't found a home to purchase yet, and your pre-approval is about to expire, it's wise to renew your pre-approval. It usually only involves re-verifying your financial documents. Provide your lender with any updated pay stubs and bank statements. Assuming there are no significant changes to your finances, you should be able to quickly obtain a new pre-approval from your lender.
While you may lose a few points, applying for a loan won't significantly affect your credit score. In fact, within a 45-day period of time, credit checks from multiple mortgage lenders are considered as being a single inquiry.
A pre-approval does not commit you to work with any particular lender. However, should you decide to use a different lender, you will need to start the paperwork over again. Staying with the same lender will generally save you time when you find a home to purchase, because they will already have your paperwork on file.
At our company, we've been involved in thousands of loan transactions with the homes we've sold since 1978. We know some great, reputable, honest lenders who genuinely want to do what's best for you. They, like us, rely on referrals for future business. Not doing right by someone is not a good way to get referrals! However, even the lenders we rely on, don't always have the same underwriting standards. If you would like some direction, we'd be happy to help. Just fill out what you feel comfortable with on the form below. We will take a look at your situation, and recommend a lender for you to talk to who, most likely, can work with your situation. If they can't, they will at least be honest with you, and tell you what you need to do in order to be in a position to move forward with the purchase of a home.
#1. It provides credibility to your offer. The top reason to become pre-approved PRIOR to making an offer on a home is that without a pre-approval letter showing that you are qualified to purchase the home, your offer will most likely be rejected. With a pre-approval in hand, home sellers will have more confidence that you won't be denied a loan to purchase their home. In short, your offer is a credible offer.
#2. It gives you confidence when searching for a home. Knowing how much you can borrow keeps you within your budget when looking at homes. You won't have to go through the heartbreak of falling in love with a home and then finding out you can't buy it.
#3. It speeds up the closing process. Since most of your information is already in the lender's system, it accelerates the loan process if your offer is accepted.
As opposed to a Pre-Qualification, which is simply an initial look at your finances and credit based simply on your application, a Pre-Approval is a thorough look into your finances and work history. In addition to pulling your credit history, a lender will obtain verification of your income and assets. They will assess your entire credit, financial and employment situation prior to giving you a pre-approval.
A pre-approval is NOT a guarantee that you will get a loan for any particular home you wish to purchase. There are two parts to getting a Loan Approval. One is approving you, and the other is approving the collateral (the house).
In order to obtain a full Pre-Approval, your lender is going to need a number of things, divided into three categories.
IDENTIFICATION
* Driver's license or U.S. passport.
* Social Security card or number.
* If you aren't a U.S. Citizen, a copy of both sides of your green card(s).
* Employment verification. The lender will need to know if your employment is stable. They will, most likely, contact your employer(s) and inquire about your employment and yearly income.
INCOME
* Pay stubs covering the last 30 days if you are working hourly or salary.
* The last two years W-2 or 1099 forms depending on your employment.
* Proof of additional income, if any.
* Federal income tax returns for the last two years with all pages and schedules.
* Business federal tax returns for the last two years with all pages and schedules. (if applicable)
ASSETS
* Bank statements proving you have enough funds to cover the down payment and closing costs.
* A gift letter if someone is helping you with funds to purchase the home. The letter must state that the funds are a gift and are not expected to be repaid.
* The last quarterly statements for financial accounts, including IRA, 401(k), mutual funds, and stock accounts.
Assuming you have all documentation ready, it's possible to get pre-approved on the same day you submit everything to your lender.
Lots of debt, a history of previous foreclosures, and low credit score(s) can slow down the process, however. Depending on what the issues are, it could slow down the pre-approval process from a few days to several months.
Providing the lender with all requested documents and not hiding anything, is the only way to speed up the process.
Pre-approvals don't last forever. Changes to your income, credit history, and/or interest rates can invalidate your pre-approval. As a rule of thumb, and depending on the lender, your pre-approval will last for 60-90 days before you will need to update your documents to get a new pre-approval letter.
Once you are pre-approved, you will receive a letter from the lender you can include with your offer. The letter indicates to the seller that you have already started the loan process and that the lender is willing to work with you. It provides the seller with peace of mind that you could actually afford to purchase their home.
If you haven't found a home to purchase yet, and your pre-approval is about to expire, it's wise to renew your pre-approval. It usually only involves re-verifying your financial documents. Provide your lender with any updated pay stubs and bank statements. Assuming there are no significant changes to your finances, you should be able to quickly obtain a new pre-approval from your lender.
While you may lose a few points, applying for a loan won't significantly affect your credit score. In fact, within a 45-day period of time, credit checks from multiple mortgage lenders are considered as being a single inquiry.
A pre-approval does not commit you to work with any particular lender. However, should you decide to use a different lender, you will need to start the paperwork over again. Staying with the same lender will generally save you time when you find a home to purchase, because they will already have your paperwork on file.
At our company, we've been involved in thousands of loan transactions with the homes we've sold since 1978. We know some great, reputable, honest lenders who genuinely want to do what's best for you. They, like us, rely on referrals for future business. Not doing right by someone is not a good way to get referrals! However, even the lenders we rely on, don't always have the same underwriting standards. If you would like some direction, we'd be happy to help. Just fill out what you feel comfortable with on the form below. We will take a look at your situation, and recommend a lender for you to talk to who, most likely, can work with your situation. If they can't, they will at least be honest with you, and tell you what you need to do in order to be in a position to move forward with the purchase of a home.