The Importance of a Pre-Approval

The key to a successful house hunting mission is the mortgage pre-approval.

You may have heard that pre-approval is a great first step in the homebuying process. But why is it so important? When looking for a home, the temptation to fall in love with a house that’s outside your budget is very real. So, before you start shopping around, it’s helpful to know your price range, what you’re comfortable within a monthly mortgage payment, and ultimately how much money you can borrow for your loan. Pre-approval from a lender is the only way to do this.

Pre-approval shows homeowners you’re a serious buyer.  When a seller knows you’re qualified to buy the home, you’re in a better position to potentially win the bidding war and land the home of your dreams.

Depending on the lender, the lender can ask borrowers for documents such as the following:

• Pay stubs and W-2s (typically two years)
• Tax returns (typically two years if self-employed or you earn commissions or bonuses)
• Bank, retirement and investment account statements (two to 12 months, depending on loan)
• Financial statements (if self-employed)
• Letters of explanation for credit blemishes
• Divorce decrees, if you pay or receive spousal or child support
• other documents required to process the mortgage loan prior to issuing a pre-qualification