Before you start looking for a new home or attending open houses, it is important to go through the preapproval process. When it comes to buying a home, shopping around without a preapproval letter is the same as going to the mall without bringing your purse or wallet, useless.
Buying a new home is exciting, and many buyers often become eager and leave out a very important step, getting pre-approved. This is partially because talking to lenders, filling out paperwork, producing pay stubs and tax papers are trivial and boring to most people. While this is true, before you become serious about house hunting you must seek preapproval from a lender, otherwise you will not be taken seriously. This will prevent you from wasting your time, as well as others’.
Why Get Mortgage Pre Approval
Pre-approval should be the first step for any serious homebuyer. Although it is extremely important, more than half of all homebuyers will skip this step as they begin their search for a new home.
Preapproval is the process in which the lender will sit down with you, and go over all of your personal finances. During this time, the lender will determine whether or not you are financially able to purchase a home, and how much you are able to spend on a home. Once your eligibility has been determined, the lender will provide you with an official letter as your proof. You will then be able to present this letter to your real estate agent or to sellers.
What a Preapproval Letter Does for You
- A pre-approval letter helps you determine the type of home to look for, as well as a price range to limit yourself to. This can save you the time and heartbreak of looking at a house that is way out of your budget.
- A pre-approval letter also lets the seller and real estate agent know that you are a serious buyer. If you are competing against another buyer for a home, having a pre-approval letter could give you the upper hand. The seller will know that you are approved to make the purchase, and might accept your offer over someone who is not. In some cases a pre-approval letter is required in order to make an offer.
- Your pre-approval letter could also save you time if you need to close quickly. Getting approved takes a significant amount of time, so having pre-approval cuts back on paperwork once an offer is made. Once again this makes you a more attractive buyer.
How to Get Pre-approval
To get pre-approved for a home loan, contact the lender of your choice and inquire about their pre-approval process. This may vary from one institution to the next. While the requirements and process will vary, most lenders require the same documents:
· 30 days worth of pay stubs,
· 2 months of bank statements from all accounts, all pages
· Tax returns from the previous two years
· ID and Social Security Card
*more to follow based on the individual
Once the lender has reviewed all of these documents, they will examine your credit report and any other financial data. Your preapproval letter is generally valid for a term of 60-90 days.
Getting preapproved is a must if you wish to be taken seriously during the home buying process.