What Documents Are Needed for Mortgage Pre-Approval?
Securing pre-approval for a home loan is an essential step that should be taken before placing an offer on a new house. Doing so allows potential buyers to explore their options without risking unexpected setbacks that could hinder the sale. Furthermore, having secured pre-approval puts the buyer ahead of other prospective buyers who have yet to secure it; making the seller more likely to accept their offer.
Typically, lenders will review your credit report and score, as well as other documents that demonstrate you are a reliable borrower. They may then run a debt-to-income ratio to decide how much they can afford to lend you. Furthermore, they ensure you have enough cash for both an initial down payment and reserves for future monthly payments.
You’ll likely be asked for a valid form of identification, such as your driver’s license or passport. In addition, they may ask for your current pay stub – an excellent way to confirm both your income and employment status.
Lenders require your bank statements for the last two months in order to identify any red flags, such as bounced checks, insufficient funds or unstable income. These documents help the lender detect any financial issues you may be facing.
Other necessary documents to include are your social security number, credit card info and a list of current employers. Your income and employment should be verified to guarantee you have enough money for a down payment, closing costs and other associated costs when buying a house.
Self-employed individuals will find it more challenging to secure preapproval from lenders due to the requirement of proof of income – tax stubs from two years with schedules, your business name and address, as well as additional sources such as freelance work or side jobs. If this applies to you, be aware that lenders may request additional documents in order to verify your income.
Once you’re ready to begin the preapproval process, it can take anywhere from one day to a week depending on the lender’s demands. Your mortgage lender should be able to assist with this paperwork since they typically specialize in handling such details.
Obtaining Pre-Approval for a Mortgage
After the lender verifies your finances, they will issue you with a preapproval letter. This document serves as proof that you are qualified and likely to secure financing through a mortgage. It should include contact information for the lender, an interest rate you’ve been approved at and estimated closing costs.
A letter of pre-approval is only a conditional approval and can be revoked if a borrower’s financial situation changes significantly, such as losing their job. While it does not guarantee smooth sailing on the transaction, it does show the seller and their real estate agent you are serious about purchasing their home and are reliable when it comes to repayment.
