In your quest to buy a home, you might check out properties online or looking up houses around your neighborhood up for sale. These are all steps you must first make to attain your desire of becoming a homeowner. Before you go into your search proper, there is something you need to do; it’s called getting pre-approved for a mortgage.
A mortgage pre-approval involves lenders going through your financial records to determine how creditworthy you are. It’s a process that allows the lender to go through your financial records to determine if you are loan qualified and how much you are eligible to borrow. Being qualified for a mortgage differs from being pre-approved – the latter holds more value to a lender.
The purpose of getting pre-approved is to convince the lender that if granted the loan, you would be able to payback. Another reason lender asks for pre-approval is to be clear on all your financial situations. The pre-approval process involves lenders going through your financial records either on your request or at their discretion. The following are things and documents you would be pre-approved about before applying for a mortgage loan.
Proof of Income
The documents showing your income statement is required to validate how much you earn on the average annually. It’s an essential document for pre-approval and underwriting. It involves you presenting your W-2 statements for the past two years, your most recent pay stubs (at least two) and any other additional source of income or bonuses.
Proof of Employment
Aside from going through your pay stubs, a lender will also want to confirm your employment status from your employer and verify how much you earn. If the job you are working in is a new one, a lender might contact your previous employer. All these are procedures the lender undertakes to ensure they are borrowing to a financially stable individual. Self-employed people would need to provide more critical paperwork about their business.
Credit Information
A lender would want to measure your debt-to-income ratio before granting you a loan. This procedure involves ascertaining if you are currently repaying any debt like a car loan, student loan or any other loan form. Providing documents relating to this information is vital.
Social Security Number
Lenders need your social security number to verify your identity, to attain your credit reports and also to request your tax returns from IRS. The information is made available through your social security cards, tax documents and all other documents showing your SSN.
Bank Statements
Your bank statement is required to determine if you have enough cash or investments needed to make a down payment, conclude closing cost and still maintain a cash reserve. Your bank statement is one of the essential documents nearly all lenders will request to see to ensure you have enough funds.
The pre-approval process is the first place a serious homebuyer begins the home application process. Speak to a financial consultant or your real estate agent to help you secure one.
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