When you decide that the time is right to pursue homeownership, it is important to be prepared for the steps along the way that will take you there. There’s a lot that needs to be sorted out before you get to the big day where those keys are put into your hands. Mortgage pre-approval is one of those things that will help propel you forward, and in fine form.
What is Mortgage Pre-Approval?
Essentially, mortgage pre-approval tells you how large a mortgage loan you qualify for. This is, for the record, not a guarantee that you will be approved. What it does do, however, is show buyers and lenders how serious you are about getting into a home of your own.
In the case of many lenders, pre-approval will also lock you into the designated interest rate, but only for a limited time as you decide whether or not to move forward. Some lenders will lock you into the pre-approved rate for as long as 120 days, but it’s best to ask about the institution’s unique policy.
What is Required of Me to Get Pre-Approved for a Mortgage?
Unlike pre-qualification, pre-approval takes into account many aspects of your financial situation to give you a figure that represents how much of a loan you qualify for. Pre-qualification certainly has its uses, but pre-approval is regarded more highly because it does get a fairly thorough snapshot of your finances. To become pre-approved for a mortgage, you will need to have a fair amount of information on hand.
Proof of Your Income
There is no getting a loan these days without being able to prove that you have the income necessary to pay off such an obligation. You will need to provide W-2 information for the past couple of years, as well as recent paycheck stubs that show a consistency or improvement in your earnings.
If you’re not sure what your credit report and credit score look like, now’s the time to check it out. Get a copy of your credit report so that you can see if there are any errors that need correction or debts that can be eliminated through repayment that you presently owe. Boost your score by making good credit decisions.
Those with high credit scores and clean reports of credit tend to qualify for larger loans, as well as smaller interest rates.
Identifying and Other Documentation
Your state identification card and social security number will be required for the lender to run a credit check. You may also be asked for:
- Divorce papers, if alimony or child support factor into your income.
- A gift letter, in the event that you are using money obtained as a gift to obtain the mortgage.
- Account statements to illustrate your assets, including banking statements.
If you have all of this documentation on-hand at your mortgage pre-approval meeting, the process will move along much more smoothly. This gets you into the home of your dreams even sooner!