What is a pre-approval letter?
A pre-approval letter provides proof that a mortgage lender has approved you to take a loan out and for exactly how much you are able to borrow. This document provides both your Realtor and the seller of a property evidence that you are serious in your path to homeownership and that you can afford the property that you placed an offer on.
When should I get pre-approved?
As your real estate agent, mentor, and coach, we recommended that getting pre-approved for a mortgage should be the first step of your home-buying journey. If you’re not sure of which mortgage lender to go with, we have a handful of trusted referrals that we have worked with in the past that we can share with you.
Why is getting pre-approved the first step of the home-buying process?
Getting pre-approved right away has many advantages.
- It gives you confidence in your search. Knowing the amount you are pre-approved for not only helps us find homes within your budget, but it will ensure that you are comfortable with the price point and monthly payment amount. Plus, no one likes falling in a love with a home and then discovering that they can’t afford it!
- It puts you on the fast track to closing. Because most of your information is in the lender’s system, a mortgage pre-approval accelerates the loan process once you make an offer and makes you a stronger buyer.
- It establishes your credibility as a homebuyer. When you put an offer on a home and include your pre-approval letter, it shows the Sellers that you are serious about buying a home, that you have your finances in check, and that you won’t be denied a mortgage if they decide to accept your offer.
What documents do I need to get pre-approved for a mortgage?
Depending on the type of mortgage you take out, here are the documents you may need to get the pre-approval process started. (Printable version available at the bottom!)
Identification (You will only need to bring one of the following forms of ID)
•Other state- or federal-issued ID
•Pay stubs for the last 30 days
•Last two federal tax returns
•Last two W-2s
•Proof of any additional income (2nd jobs, social security, alimony, etc.)
•If self-employed, YTD profit and loss statement, and two years of 1099s
•Last two statements on all bank accounts
•Statements for all investments and/or retirement accounts
•Social Security card or number
•Settlement statement from a previous home sale, if applicable
•Contact information for your landlord(s) for the last two years, if applicable
•Divorce decree, separation agreement, and/or property settlement agreement, if applicable
•Gift letter if a family member is helping with down payment
•A letter of explanation for late payments, collections, judgements, or other derogatory items in your credit history, if applicable
Some lenders may require additional documents depending on the type of loan you are taking out.
To get your free printable checklist, click HERE