Do you know where to start when buying a house? This process can be intimidating, but know that unless you’re paying with cash, you should start with a mortgage pre-approval. That is when a lender says they’re willing to let you borrow a certain amount of money to purchase a home. The document says that you’re allowed to purchase and move forward with the home-buying process as long as you meet certain criteria and your income doesn’t change drastically within that time.
A pre-approval is like a financial profile for you. It takes into account how much money you make, what you have in the bank, what kind of investments you have, what debt you have, and more. When you give this information to lenders, they will do a hard credit inquiry and assess if you are a financial risk to their company.
“Understanding the ins and outs of pre-approvals is crucial for buyers.”
Lenders will need specific documents to do a pre-approval. They will ask for your W-2 statements for the last two years, your pay stubs and tax records, your bank statements, your driver’s license and social security card, and more. This information will help them make an informed decision about how much money you can afford to pay for a home. Generally, they last between 60 and 90 days, but that’s based on the protocols and criteria for your lender.
A pre-approval will help you understand how much you can purchase. The last thing any of us want to do is to fall in love with something amazing and then find out we can’t afford it. It also helps you in the eyes of the seller by showing them that you are ready and willing to purchase their home. Plus, it speeds up the home-buying process. If you have to wait on the pre-approval, that will slow down your offer time. In some cases and some markets, you may miss out on that home.
Understanding the ins and outs of a mortgage pre-approval is crucial for prospective homebuyers. Our goal is to help you walk through every step of that process, so call us anytime. We would be happy to help you!