What is Pre-approval letter?
Before shopping for home, you need to find mortgage lenders or banks to secure your home loan. Where do you start that process? Asking a real estate agent is one good place to start. Agents work with an array of local loan officers representing different lenders, and depending on whether you’re a veteran, your down payment size, your credit score, and a number of other factors, a good local agent will know which lender (and loan officer) might be the best fit for you.
The first step is to determine how much money you can borrow or how much home you can afford before you begin shopping for home. Getting pre-approved for a mortgage puts you at a significant advantage when shopping for home.
To get pre-approved for a loan requires verification of your income, credit, assets and liabilities. The industry standard for a pre-approval takes about 1 - 3 days. Typically a pre-approval letter is valid between 60 - 90 days.
TBD approval is the strongest and best method for buyer to use for their pre-approval process especially in a competitive housing market. With this method, lender gets a full application, income, assets, credit report and complete credit package and submit to their underwriters to examine the file.
It is recommended that you get pre-approved before you start looking for your new home. There are a few reasons to get pre-approved:
- You are looking at homes that fit your budget.
- Since seller knows that your loan is pre-approved, you are in a better position when negotiating with seller.
- You may be able to close your loan faster.
What do you need to get pre-approved?
- Pay stubs
- W2
- Recent bank statements
- Photo ID
- Verification of employment
- Income tax return
The right loan officer will explain your financing options and help you drill down to the real nitty-gritty, like the size of the monthly mortgage payment that’s affordable on your current income, what you should expect in terms of closing costs, and whether the down payment amount you’ve saved is going to cut it.
Agents can also explain what to expect during the mortgage loan application process. If you still have a lot of questions about pre-approval, let's chat it over coffee! Call me at 323-657-4866.
