So you’re ready to buy a new home, but before you start house hunting, you’ll need to get pre-approved.
Most real estate agents won’t start taking you to look at homes until you have a pre-approval letter in hand.
A mortgage pre-approval means a lender has pulled your credit and verified your income and assets and that you are approved for a home loan.
Getting pre-approved for a mortgage is the first step in the home buying process. Usually, you can get a pre-approval letter in your hand within a day as long as you have the documents a lender needs to get you pre-approved.
Gather Your Loan Documents
There are a few documents you’ll need to have to get pre-approved. A loan officer will ask for your past 2 years of tax returns, w2’s, bank statements, pay stubs, and photo ID. It would be best if you gathered these before calling to expedite the process.
Documents You Need to Get Pre-Approved
Documents Needed for Pre-Approval
• Last two years of W2's from all employers
• Last two years of tax returns
• 30 days worth of paystubs
• Three months of bank statements
• Profit and loss statements if self-employed
• Driver's License
Before You Call a Lender
Before you start calling lenders to get pre-approved, you should make sure that you meet some of the basic loan requirements.
Check Your Credit Score
Your credit score is one of the biggest factors in determining your eligibility for a mortgage. 620-640 is the target minimum FICO score you should be aiming for.
There are some types of loans that are for people with less than perfect credit. FHA loans require a 580 credit score with a 3.5% down payment.
Check your credit score for free with these apps and websites:
If you have a score below 580, it’s best to take some time to work on improving your credit before applying for a loan.
Use a Mortgage Calculator
Before going through the hassle of calling a loan officer, it’s good to make sure you can first afford a mortgage payment. There are many costs associated with a mortgage besides just the monthly payment, such as PMI, home insurance, and HOA fees.
You can easily see if you can afford a mortgage based on your income with our home affordability calculator.
The Bottom Line…
As long as you have all of the documents ready to go and the automated underwriting systems return a “approve” or “refer,” then you will get a pre-approval letter showing how much you’re approved for in a matter of minutes.
To speed up the process, make sure to have all of your documents ready for your loan officer.