If you’re starting to house hunt, and have faced the question “Are you pre-approved?” it might be time to consider investigating more. Being pre-approved can speed up your house hunting search, and can help you secure the home or property of your dreams before someone else does. Here are some benefits of being pre-approved.
Pre-qualified and pre-approved
Understanding the difference between being pre-qualified and pre-approved is important. Pre-approved means that a lender has checked your credit score and verified your documentation, so that you are approved for a specific loan or mortgage amount if you need it. Being pre-approved usually lasts for a 90-day period in most states. Pre-qualified means that an estimation of how much you can afford to spend on a mortgage from month to month has been done, but it is not final. Your final loan approval happens when you have the property that you’re going to apply the loan to and you have an appraisal done on that property.
Bring proof of your income for the last two years. All loans currently need this proof of income. W-2s are also accepted, in addition to pay stubs. Bring bank statements, investment account statements, etc. to show that you have enough money for a down payment, closing costs, fees, etc.
You also will need to provide proof of employment, or employment verification. Today lenders want to make sure that they are loaning money to someone with stable employment, as it increases the odds of the loan being paid back in full. They may call to verify your employment and check on your salary. Don’t forget the basics: your driver’s license, a social security number and permission for the lender to pull your credit report.
Good credit takes time, and it’s necessary to purchase a home with a loan or mortgage. If you’re considering buying a home sometime in the near future, monitor your credit and make sure it’s acceptable to be applying for a loan. Talk to a banker or lender, or financial advisor to see what you can work on to improve your credit in the meantime.
Be advised to shop around to see who is going to offer you the best mortgage rate and the best interest rate in your state and area. Apply for those rates to get pre-approved. Meet with a lender to discuss your options, find out what you may or may not be able to afford. Getting pre-approved prior to house hunting helps your search, because you know what you can or can’t feasibly afford.