With the mortgage rates dropping, this could be a good opportunity to get your own house. So if you are serious in finding your next home, you should know the right steps how to acquire one.
You may begin looking at open houses or browsing real estate sites. But you only know it’s getting real once you are in a lender’s office, getting a mortgage pre approval letter.
Understand Difference Between Pre-Qualification and Pre-Approval
To explain simply, pre-qualifying means the lender accepts the information you gave about your credit score and financial information without verification and review.
On the other hand, mortgage pre approval is when the lender already gives its commitment to finance your house acquisition through a loan. Most home sellers prefer pre-approval than a mere pre-qualification.
Things to Prepare to Get Mortgage Pre Approval
Here are all forms and submissions you will need to have prepared in order to get mortgage pre approval.
Verified Proof of Income
Have your W-2 statements from the last two year ready. You also need to present the latest pay slips or stubs which show your year-to-date income. Lenders also require proof of extra income like bonuses or spousal support. Finally, submit your recent tax returns (last two years).
Proof of Assets
You have to submit your bank statements and investment account statements. This is to prove that your funds are sufficient for the down payment, cash reserves, and closing costs.
Good Credit Score
You need to have at least 620 FICO (credit) score or higher to get mortgage pre-approval for a typical loan. In some cases, FHA loans may also require a 620 credit score. The higher your credit rating, the lower your interest rate would be.
The lender will likely to call your current employer to verify your employment and confirm if your declared salary is true. If you’re self-employed, you need to present additional documents proving your business and stable income.
Other Pertinent Documents
These include driver’s license, Social Security Number (SSN) and signature to authorize the lender to pull out your credit report.
So now that you already know what you need for fast mortgage pre approval, you have an advantage of preparing them in advance. Organize them and submit have them ready for your pre-approval session.