Get Pre-Approved For Your Mortgage 

Shopping for a home is exciting! Owning your own home is part of the American dream and it’s likely the biggest purchase you will ever make.

The place to start, however, is a lender’s office, not an open house. Home sellers expect buyers to have obtained a pre-approval letter—and will not be willing to negotiate with you until you have proof that you can obtain financing.

A lender will run some numbers based on your income, assets and liabilities and tell you the maximum you can borrow—and give you a mortgage “pre-qualification” letter. This gives you an idea of the price range of homes you should be looking at. Of course, it may not make sense to aim for the top of your spending ability—better to carefully consider your own comfort level with the size of your monthly payment which will include PITI (Principal + Interest + Taxes + Insurance).

While pre-qualification helps you know how much house you can afford, you’ll also need to get “pre-approved”. During pre-approval, the lender will actually check your credit and verify your documentation to approve a specific loan amount—and give you a “pre-approval” letter which will be submitted with your offer when you find a home you want to purchase.

What You Need for Lender Pre-Approval

1. Proof of Income

W-2 statements and tax returns from the past two years, recent pay stubs that show income as well as year-to-date income and proof of any additional income such as alimony or bonuses.

2. Proof of Assets

Bank statements and investment account statements to prove that you have funds for a down payment, closing costs, and some cash reserves. An FHA loan requires a down payment of as low as 3.5% of the purchase price, while conventional home loans require between 10% and 20%.

3. Good Credit

Lenders offer the lowest interest rates to customers with a credit score of 740 or above. If your score is below that, you may have to pay a higher interest rate or pay “discount points” to lower your rate. Most lenders require a credit score of 620 or above in order to approve an FHA loan.

4. Identification Documentation
Your driver's license, passport or government issued picture ID as well as your Social Security card.

5. Employment Verification

Your lender will likely call your employer to verify that you are still employed and to check on your salary. If you have changed jobs in the past two years, your lender will want to contact your previous employer. If you are self-employed, you’ll need to provide additional paperwork documenting your business and income.

Pre-approvals are free. Choose a lender (or a few lenders) and get pre-approved. You’re not obligated to work with the lender that pre-approves you. You might discover that one lender approves you for more than another which might influence which lender you finally choose. Click here to see my list of Recommended Lenders.

 

Ruth Lyons
Ruth Lyons
REALTOR®
5850 Waterloo Road Suite 140 Columbia MD 21045