Getting a mortgage pre-approval is a complex process but a necessary one in the acquisition of a house. Mortgage pre-approval involves having the lender determine the loan program you can qualify for and the interest rate thereof. The lender bases the assessment on factors such as income, credit score, debt, as well as employment history.
Why is it important to get pre-approved?
Altius Mortgage Group, a mortgages expert from Utah, reiterates that even before you begin looking at mortgage offers, you must first get pre-approved. Going house hunting before doing so is like walking into a supermarket without a wallet — even if you spot something you like, you won’t be in apposition to engage in a transaction.
Getting pre-approved gives you an accurate idea of what you can afford, saving you the time you’d spend looking at houses beyond your price range. Further, a pre-approval letter is proof that you’re a credible buyer, and sellers will take you more seriously than someone without this letter.
What documents do you need to get pre-approved?
The documents required vary from lender to lender. But, generally, you will need documents that show your income, assets and any other commitments against your income. These are some of the documents you’ll need:
- Thirty days of pay stubs
- Bank statements of two months from all your accounts
- Two years of W2s
- Last two federal tax returns
Does getting pre-approved guarantee a loan?
It’s important to note that pre-approval letters are subject to modification and even cancellations. Should your financial conditions change, the lender has every right to cancel the pre-approval letter.
A pre-approval letter is not a commitment to make a loan, an offer to lend, or a guarantee of specific terms or rates. Before extending your loan, the lender may require additional asset and income verification, plus the satisfaction of other conditions.
For fear of not getting approved, some buyers put off the loan application process. The problem with doing this is that you postpone your dream to own a house. If you’re worried about your credit score, getting an assessment will help you begin improving the score for future eligibility for mortgages.