Why Should You Get Pre-approved for a Mortgage?

Getting pre-approved is the first step you should take when starting your search for a new home. Why is it so important?

My first reason it’s so important is because it will help breakdown the numbers. Not only will you see how much your monthly payment will be, but you’ll also see if it’s actually reasonable. You don’t want to fall in love with a home that you can’t afford. Lenders review your finances and provide a realistic estimate. They’ll have the most up-to-date information such as current interest rates.

Once you’re pre-approved, sellers know you’re serious about buying a home. With a pre-approval letter, you can show that a bank has already looked into your finances and agrees that a certain loan amount makes sense. If you are interested in a home and want to make an offer, the seller wants to know that you can follow through. Without a pre-approval, you could be passed over in favor of someone who already has a lender and the funds lined up.

What is a pre-approval?
Let’s start with what it isn’t: it’s not a promise that you’ll get a loan for the home you want to buy. A mortgage pre-approval only means a loan officer has looked at your income, debt, assets, and credit history—and determined how much money you can borrow, how much you could pay per month, and what your interest rate will be.

A pre-approval letter doesn’t bind you to any lender. That being said, if you do decide to take out a mortgage through another lender, you’ll have to repeat the paper work. But if you take out a mortgage through the lender who issued you a mortgage pre-approval, they’ll have your paperwork on file, which will save you time when you’re closing on a house.

What do they check for?
credit check
including how much you have in bank and investment accounts and your income, as well as your financial obligations, or what you owe
To get pre-approved you’ll need proof of assets and income, good credit, employment verification, and other types of documentation your lender may require.
Gather your information: You typically need confirmation of your income through pay stubs, tax returns, W-2 forms, and Forms 1099, if applicable. Some lenders ask for bank statements as well, and you might have to confirm your identity by providing a driver’s license or other ID.

While it can feel burdensome to go through the documentation steps required to get preapproved, it can actually save time and hassle in the long run.