Answering some common questions about getting pre-approved.
Whether you’re looking to buy your first home, get a bigger place to accommodate your growing family, or you’re wanting to downsize, the homebuying journey can be both exciting and overwhelming. But before you begin, did you know that you need to get a pre-approval letter first?
In this Clearview blog article, we’ll explore why, when, what you need, and how to get pre-approved for a mortgage.
What is a pre-approval?
According to the Consumer Financial Protection Bureau, “a pre-approval letter is a statement from a lender that they are tentatively willing to lend money to you, up to a certain loan amount.” It’s important to recognize that this letter is not a guaranteed loan offer. Instead, it serves to show sellers that you’re likely able to get financing. In many cases, sellers require this letter prior to negotiating an offer with a buyer.
Why do you need to get pre-approved for a mortgage?
Getting pre-approved is an important step in the process for a few reasons:- It shows that you’re serious about the home buying process.
- It helps you understand what you can afford and that you have the financial means to back up your eventual bid.
- It can speed up the process. When you’re ready to make an offer, having a pre-approval letter in hand can reduce delays in securing financing.
When do you need to get pre-approved for a mortgage?
Timing is everything when you begin the journey of buying a home and get pre-approved for a mortgage. Experian explains that “pre-approval letters are only valid for a limited time—typically 90 days, but possibly as little as 30 days.” The application process may have fees and also generates a hard inquiry on your credit report.
Finding the sweet spot between applying early but not too early can be difficult. Consulting with a professional, like your real estate agent or mortgage loan officer, can help make this process a little easier.
How do I get pre-approved for a mortgage and what do I need?
There are quite a few documents you need to have ready before you get pre-approved for a mortgage. These items include:
- Proof of income, such as W-2s and tax returns from the past two years.
- Account statements that prove you have available funds for potential down payment, closing costs, etc.
- Credit information so your lender can complete a credit inquiry.
- Recent pay stubs to verify employment status.
- Other personal documents and identification including driver’s license, Social Security number, etc.
- Information about outstanding loans or credit cards.
Once you get pre-approved for a mortgage, you’ll be ready to officially put in an offer! If you’re looking for more guidance on how to get pre-approved for a mortgage and the rest of the homebuying journey, check out our Mortgage Guide for important tips and information.