What is a mortgage pre-approval letter?
It is a statement from a lender that, based on a preliminary examination your financial situation, including your credit history and debt-to-income ratio, they are willing to issue you a loan up to a certain amount.
What kind of information might the lender ask for in the pre-approval process?
- Pay stubs and W-2 statements
- Tax returns
- Bank and investment statements
- Loan documents for your current home, if applicable
Why do I need a pre-approval?
Any unanticipated problems in your creditworthiness that would slow down or prevent you from getting a loan can be found and corrected before attempting to purchase a home.
It will provide a more focused and efficient search process. Looking at houses you will not be able to qualify for will waste both your time and your realtor’s, and may lead to the disappointment of falling in love with a home you cannot currently afford.
It also ensures the seller that your offer has the backing of a lender and is far less likely to fail to close due to financing problems.
When should I get pre-approved?
Ideally, this should be done early in the process. You may find realtors that will show you one or two houses without pre-approval, but they will soon want some evidence that you are truly capable of purchasing the houses they are taking the time to show you.
In our current seller’s market, the house you decide you want may not be on the market for long. If you have your pre-approval ready to accompany an offer, it will speed up the process and help ensure you can get your offer first in line. Any delay in getting your offer ready may result in someone else buying the house of your dreams!
Once I have a pre-approval from a lender, do I have to use them for my mortgage?
No. A pre-approval does not obligate the lender to issue you a loan, or you to accept it from them. You are still free to shop around for a better deal for your mortgage loan.
Contact us if you have any questions about the process or would like help finding a lender to talk to.