Pre-Approval for a mortgage is a key step in the home buying process. It can be especially important when it’s a seller’s market. That’s because a more prepared buyer can sweep in first and get the home they want. So, what is pre-approval, and what do you need to get pre-approved for a mortgage? Let’s dive in:
Pre-Approval vs. Pre-Qualification: What’s The Difference?
Pre-Qualification and Pre-Approval are terms often used interchangeably. It’s easy to confuse the two, but they don’t carry the same weight in the home buying process.
What It Means To Pre-Qualify
Pre-Qualification is an early, informal part of the home buying process where you receive an estimate of how much you might be able to borrow. It’s a good starting point if you’re in the market for a home, but it isn’t official. Pre-qualification is simply an initial report that gives you an idea of what you may qualify for prior to a lender completing a full review of your finances.
It’s also important to note that pre-qualification is for your information only and does not hold water when negotiating good faith and earnest offers with sellers.
What It Means To Be Pre-Approved
Pre-Approval is a formal review of your finances. You will complete a mortgage application so that one of our Mortgage Loan Originators (MLO) can analyze your finances, credit report, and scores.
Your MLO will check your ability to repay a loan, plus determine your interest rates and loan types based on your financial information. Typically, you’ll want to gather all the documentation necessary for the pre-approval process 60 to 90 days before you plan to buy a home.
What Is Required for Mortgage Pre-Approval?
Since pre-approval is a full review into your finances, you’ll need to provide documentation, your social security number, and complete a mortgage application. Here’s a list of documentation you’ll typically be required to provide:
- 2 Years of W2s
- Clear copy of your Photo ID
- Recent Paystubs covering a 30-day period
- Recent statements verifying all funds available for transaction
- Tax Documents (if self-employed)
Pre-Approval Gives You An Edge.
You get leverage in early negotiations with sellers when you’re pre-approved for a home loan. And since there are more homebuyers than homes right now, that’s a significant benefit.
In addition, a pre-approval letter gives sellers the peace of mind they need to take their home off the market and begin the purchase agreement.
It’s also important to note that while pre-qualification is a guideline, pre-approval is more specific. You can search for a home in earnest because you’ll know the precise price range you’re approved for.
Thinking Of Buying A Home?
Contact us today to get pre-approved for a mortgage. Our loan experts can walk you through the process step by step.