Mortgage – Pre-Approval Process

It is desirable to have a pre-approval letter from a lender before the home shopping process begins.  This way, when the perfect home is found we can immediately move forward with an offer that will be taken seriously by the seller.  If there are multiple offers, yours will move to the top of the stack with a pre-approval letter.

What is pre-qualification? What is pre-approval?

Pre-Qualification

Pre-qualification (prequal) is a relatively informal process by a lender who will have you fill out an application, which is usually available on line or through their app with a quick credit check. This is usually good enough to write an offer. A more in-depth preapproval process is explained below. It’s not a bad idea to go ahead and go through the preapproval process, but in the interest of time and the ability to make an offer more quickly, prequal will usually suffice to get a property under contract.

Pre-Approval

Pre-approval is more formal than pre-qualification and it takes a bit more time. To get pre-approved, you will provide your credit history, employment, and down payment funds, all of which will be verified.

The Benefits of Pre-Approval Include:

• Pre-approval guarantees your loan, but is not a mortgage contract. You can’t get the mortgage until the lender can appraise the property and conduct a title search. This happens after your offer to buy a house is accepted.
• It may allow you to lock in your interest rate for a period of time. (A fee may apply here.)
• You may be better able to bargain with a seller. (See above.)

Loan Application Checklist:

• Last 30 days pay stub
• Copy of last year’s W2 (most recent 2 years for FHA)
• Most recent 2 month bank statements
• Most recent Savings/Investment account statement(s)
• Name and phone number of homeowner’s insurance agent, and declaration page
• Valid driver’s license or picture ID
• Most recent 12 months canceled rent checks (if applicable)

Other Additional Documents:

• Letter explaining derogatory credit or bankruptcy (if applicable)
• Copy of Bankruptcy Petition and Discharge (if declared within past 7 years)
• Copy of divorce decree and property settlement (if applicable)

Copy of most recent 2 years complete tax returns to verify investment income/cost (if applicable)

• Searching for a Mortgage
• Mortgage Checklist
• Mortgage Types
• How Much Can You Afford?
• Mortgage Calculator
• Applying for a Mortgage
• Know Before You Owe