Home shopping has as much to do with getting a loan approval as it does with choosing the right property. You cannot purchase anything if you don’t have the money or funding. Picking houses can be fun but if you’re really serious about getting into your own home then you need to get a mortgage pre-approval. A pre-approval determines whether or not you can get the loan so it’s important for a variety of reasons.
Most sellers these days want proof that a buyer will have the funds or financial backing to purchase the property. Pre-approval not only gives you this but it also tells you the amount you can afford. You can discuss your options, terms and cash flow with the lender once you get a better view of what you can afford.
Difference Between Pre-qualification and Pre-approval
They may seem the same but they are not. Pre-qualification generally refers to the first step in processing your mortgage. It is simple. You have to meet with the lender to pre-qualify. You provide the lender information like your income, liabilities, assets and other relevant information. This will allow the lender to calculate how much you can borrow. The process is usually informal. However, take note that the pre-qualified amount is not yet final.
When it comes to pre-approval, the lender will check your financial and credit information. They will also examine your employment and other relevant documentation. This confirms the amount you can qualify for.
There are several things you need to do to get pre-approved. Pre-approval is a formal process with requirements. Depending on the lender, the document requirements may vary but they generally include:
- Proof of income – examples include your latest pay stubs, federal tax returns for the last three years, quarterly statements of your savings, checking and investment accounts
- Assets – investment accounts and existing bank statements
- Employment – pay stubs and other employment documentation
You will also need to have a good credit score to increase your chances of pre-approval. Most lenders offer the lowest interest rates for those with 740 credit score or above.
Your lender may also require you to provide proof of identification like a state ID card or a driver’s license. They’ll also need your Social Security number. If you want to increase your chances of getting a loan approved then work with a trustworthy loan specialist like Columbus OH Mortgage Broker. Loan specialists can help you figure out the best options for your situation.