Mortgage Pre-approval Is A Huge Advantage
You’ll want to get a mortgage pre-approval at the beginning of your home buying journey because it’s the best way to learn your maximum loan amount. Your other option is to estimate how much house you can afford using an online calculator. This will give you a general idea, but a pre-approval will give you the most accurate number. Knowing your price range and what houses you can actually afford is a huge advantage. Not to mention the disappointment of falling in love with a property and then discovering that a lender is willing to loan you less money than you had estimated.
Pre-approval Will Also Position You As A Serious Buyer
A pre-approval letter shows that you can secure a mortgage and gives you an advantage over potential buyers without pre-approval. This can be true, especially, in competitive markets where real estate agents and sellers can afford to pick and choose with whom they work.
Really want to give yourself a competitive edge in the market? Obtain pre-approval letters from several lenders! Also, the slight difference in the interest rates a lender charges can mean significant savings, so it really does pay to shop around. However, to avoid extra hard inquiries on your credit report, apply with multiple mortgage lenders in a short period of time(14 to 45 days of each). This way, the credit pulls will count as a single inquiry.
So How Do I Get Pre-approved For a Mortgage?
First, check your credit score and if needed, repair it. The higher credit score you have, the better the terms you’ll receive on a mortgage. Next, prepare your personal finance documents like debt, income, assets and other aspects. While every lender has different requirements, having the following in hand is a good starting point:
- Two most recent pay stubs
- Past two years tax returns
- Last 60 days bank statements
- Proof of employment
- Employer contact information
- List of your debts
- Investment account statements(including 401(k) and IRA)
- Proof of rental payments and landlord contact information
Bottom line
It’s almost a must to apply for pre-approval at the very beginning of your home buying journey. It’s even better to apply with several lenders to ensure you get the lowest interest rate you can. A mortgage pre-approval will give you the most accurate number for how much mortgage you can afford and will position you as a serious, competitive homebuyer.