You don’t want to miss out on the house of your dreams because your mortgage is going through approval. The best way to secure the home that you crave is by getting pre-approved on your mortgage by a lender. Getting pre-approved can take a while, so it’s important to do it well ahead of time. This might sound like a drag to do, but it’s straightforward when you have all your information ready.
What Exactly is a Pre-Approved Mortgage?
When you pre-approve your mortgage, the lender is confident that you can make down payments and then an income that will be able to handle mortgage payments in the future. The next step would be for the lender to appraise the property to make sure its price is equal to or higher than the purchase price.
Why Get Pre-Approved?
When you hand the sellers the papers that you’re pre-approved for a mortgage it shows them that you mean business and that they can take you seriously. The documents will significantly increase the chance of you getting the house. Anything that brings you one step closer to owning a home is worth doing.
The Steps to Get Pre-Approved
To show to the lender that you are a responsible adult and can make your payments you must first provide the necessary information. Let’s go through some steps that will have you prepared to meet with a lender.
- Credit Score: Don’t let this part slow you down! When you are aware of your credit score, you’ll know more about what you qualify. Check this out early before the meeting so that if there are any mistakes, you can quickly remedy them.
- Income Statements: This is where the lender checks that you can make payments now and in the future. This information will come in the form of W-2s, tax returns, and pay stubs that go back around two years. You will also provide any information additional income sources even if your part-time job is babysitting weekends, if its income, your lender will want to know.
- Asset Papers: This is basically anything you own that is worth money. You can show proof of your assets to the lender via a bank statement.
- Identification: This would be your social security, drivers license, or passport. Your social security is a must for the lender to check your credit. Your high school yearbook photo will not work here.
With all this information you should feel safe to go into any meeting to get pre-qualified on a mortgage.
After going through that process of meeting with a lender you be considered pre-qualified for a mortgage loan. Here you’ll know what you can afford and what you can not with your assets, income and credit score. At this stage, pre-approval can take as long as 2-4 weeks.
Once you’re pre-approved the lender will then conclude which loan programs you qualify for, the highest amount you can borrow, and your options of interest rates. Remember that pre-approval on a mortgage loan can last anywhere from 60-90 days.
If nothing goes wrong then voila your lender will issue a loan commitment that needs to be approved by an underwriter who will return the application with either four options, approved, approved with conditions, suspended until more documentation, or denied. Once you’re approved you’re ready to move on with the seller to the final steps of home ownership!