What is a mortgage preapproval?
Your mortgage preapproval is a statement of how much money a lender is willing to let you borrow to pay for a house. It’s an important step in the home-buying process. A preapproval is based on your financial situation, including how much you have in bank and investment accounts and your income, as well as your financial obligations, or what you owe. A lender also performs a hard credit inquiry when determining preapproval for a home loan.
How to get preapproved for a mortgage
First of all, understand that, because of the large amount of money involved in a real estate transaction, you’ll need documentation proving your income and assets. Some of the documents you’ll need to submit to your lender include:
- Current pay stubs
- Federal income tax returns from the last two years (including W-2s)
- Recent bank statements
- Identifying documentation, such as a driver’s license or passport
Those who are self-employed might also need to include information from business accounts and undergo an income audit. This might include asking an accountant to verify that your income is stable by speaking with customers, reviewing business records and taking other steps. Find out from your lending institution what’s required when you’re self-employed.
Why should I get preapproved?
Once you’re preapproved, sellers (and their real estate agents) know you’re serious about a home — and they know you can afford it. With a preapproval letter in hand, you can show that a bank has already agreed to issue the mortgage. If you look interested in a home and want to make an offer, the seller wants to know that you can follow through. Without a preapproval, you will likely be passed over in favor of someone who already has a lender and the funds lined up.
On top of that, getting preapproved gives you an idea of how much home you can afford. You can see how much money the lender will give you, figure out a down payment, and know if the houses you’re considering are practical. It saves time during house hunting to immediately eliminate homes out of your price range.
I have been in the financial industry for 10 years. I have worked for small credit unions and large national banks. I have worked extensively in every part of the mortgage process from processing, closing, and origination. My goal is to take all that knowledge and make it work for you. Home buying can be overwhelming, but I will help guide you through the process. Starting with an initial conversation to help me understand your specific needs and goals. From there we will be in constant communication as we go through the process and get you to the closing table.
I chose Fidelity Direct mortgage because they have the breadth of loan products and options that I can always be confident that I have the right tool to help each of my clients. Whether you are buying a new home or refinancing your current home give me a call today and I will be happy to help.