Pre-Approval Is a Critical First Step on Your Homebuying Journey
If you’re planning to buy a home or invest in real estate this year, one of the first steps on your journey is getting pre-approved. Especially in today’s housing market when mortgage rates are higher than they were just a few months ago, getting a mortgage pre-approval can be a game changer. Here’s why.
What Is Pre-Approval?
To better understand why pre-approval is key, it’s important to know what pre-approval is. The Mortgage Reports explains it like this:
As part of the pre-approval process, a lender will look at your finances to determine what they’d be willing to loan you. From there, your lender will give you a pre-approval letter to help you understand your true price range and how much money you can borrow. That can make it easier when you set out to search for homes because you’ll know your overall numbers. And with mortgage rates rising and impacting affordability, a solid understanding of your numbers is even more important.
Pre-Approval Can Signal You’re a Serious Buyer
Another added benefit is that pre-approval lets the seller know you’re qualified to buy their house. A recent article from realtor.com notes:
Even though bidding wars are easing this year as the market shifts, preapproval is still an important part of making a strong offer. It can help a seller feel more confident because it shows you’re serious about their home and that you’re a qualified buyer.
5 Things You Need to Be Pre-Approved for a Mortgage in Kalamazoo
Home shopping commonly begins at a lender’s office with a mortgage application rather than at an open house. The majority of vendors have financing terms and conditions that they are looking for prospective buyers to meet; they frequently have room to negotiate with them if they do.
5 Things You Need To Get A Mortgage Pre-Approved in Kalamazoo
1. Proof of Income
Prospective buyers should provide W-2 forms, pay stubs, income tax returns, year-to-date income, and any additional income sources.
2. Proof of Assets
The lender and the borrower’s bank accounts and income statements reveal that the borrower has sufficient funds to fit a downpayment, closing costs, or reserves on cash. The down payment, expressed as a percentage of the sales price, varies depending on the loan type. Many loans require the buyer to purchase private mortgage insurance (PMI) if they are not putting down 20% or more of the sales price.
3. Good Credit
Most lenders demand a minimum of a FICO score of 620 to approve a conventional loan or a score of 580 to obtain the Federal Housing Administration (FHA) loan. Many banks offer the lowest interest rates on loans to consumers with a high score of 760 or higher.
4. Employment Verification
Lenders will not only verify an individual’s earnings through pay stubs but also will probably call the organization to confirm the individual’s salary and work history.Additional data, such as the borrower’s income stability, the location of the company, the financial strength of the business, and the ability of the business to continue generating and distributing adequate income for the full repayment of debts, can be provided by self-employed borrowers.
5. Other Documentation
The borrower will also need to provide their driver’s license number, Social Security number, and authorization for the lender to pull a credit report.
Where to Go From Here
Getting pre-approved for a mortgage is critical. It helps you better understand what you can borrow and shows sellers you’re serious about purchasing their home. Connect with a local real estate professional and a trusted lender so you have the tools you need to succeed as a homebuyer in today’s market.
Want to know exactly what a lender is going to be looking for when you purchase a house? You should get our FREE preapproval guide!