Many lenders are quote quick 10 minute pre-qualifications over the phone or online. A true mortgage pre-approval not a prequalification, is the only thing that holds any weight, a pre-approval means reviewing all of the necessary documents.
With a constant stream of new lending guidelines, volatile mortgage rates and tightening regulation from the government, very few real estate agents will show homes to a potential buyer without a pre-approval letter.
A Pre-Approval Letter will help you in three ways:
- It lets you know how much mortgage you can qualify for
- It gives you an estimate of what your total housing payment would be
- Submitting a strong “Pre-Approval” letter with a purchase offer will give the seller more confidence about your ability to complete your end of the agreement
In order to get a pre-approval letter, you’ll start by filling out a loan application and submitting a few documents for the loan officer and / or underwriter to review.
Common Loan Pre-Approval Documents:
Income / Assets for Wage Earner:
- Last 2 year W2s
- 2 most recent Pay Stubs
- 2 most recent Bank Statements, 401(K), Liquid Assets, Investment Accounts
Income / Assets for Self-Employed:
- Last 2 year Tax Returns – Business and Personal
- YTD P&L Statement
Letter of Explanation For:
- Employment Gap or New Line of Work
- Late Payments / Judgments / Bankruptcy on Credit Report
- Bankruptcy Discharge
- Child Support Documentation
- Lease Agreements (If own other Rental Properties)
- Mortgage Payment Coupons (If own other Real Estate)
Most borrowers also want an opportunity to learn more about the loan officer before digging up all of these personal documents. Spend 15 minutes on the phone asking the loan officer how long they have been in business, to explain how mortgage rates work, quizzing them on some basic industry vocabulary, how do they stay in communication with everyone involved in the process. This conversation should be more than just a lender qualifying you, it’s you making sure the person you are choosing has the ability to get your loan done on time without the all too common stressful surprises.
Either way, you’ll definitely want to have the above list of approval documents ready once you’ve decided on the right loan officer that you trust will meet your expectations.