Mortgage Pre-Approval Basics | Huntsville Real Estate

    First-time home buyers and veteran owners alike often find the home buying process daunting. Shopping for a home is a huge undertaking, and navigating through the process smoothly is key to finding the perfect home. Getting a pre-approval for a mortgage is the first step in the process. Follow our basic tips below:

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    What is a Pre-Approval & Pre-Qualification?

    A pre-approval is, in its most basic form, a letter from your potential lender which informs sellers how much home you qualify for. The lender will take into account your income, debt and credit scores, and arrive at a figure the bank will approve. This pre-approval is good for up to 90 days and is a necessary tool in the home buying and negotiation process.

    A pre-qualification is somewhat different, however, than a pre-approval. A pre-qualification is simply a statement which estimates how much mortgage you can afford based on your financial history from the previous two years. It says you’re qualified for a loan, not that the lender has already approved you for one.

    Why You Should Get a Pre-Approval

    Getting a pre-approval shows that you are a serious buyer, not just someone who is viewing homes for fun. Some people attend open houses and go on home tours as a hobby and have no intention of ever buying the home. With a pre-approval in hand, you are telling the seller you have the means and the motivation to make a home purchase in the next 90 days.

    A pre-approval will also give you an accurate picture of what you can reasonably afford. In some cases, you will not be able to make an offer on a home without a pre-approval letter.

    Important Documents

    The first step in getting a pre-approval is to contact a lender who will start the process. The pre-approval usually takes 48 hours or less if you have all the documents you need. Gather the following documents to get started on the process.

    • W2 from the past two years
    • Three months of pay stubs
    • Tax returns from the past two years
    • Bank statement from the past three months
    • Investment asset information
    • Self-employment tax filings
    • Contact information for your landlord

    The lender will also obtain a copy of your credit report to determine whether you meet the scoring requirements and to determine how much house you can afford.

    What Happens If I Can’t Get Pre-Approved

    If you can’t get pre-approved from the lender, look closely at the areas of concern that the lender has identified. Taking action such as improving your credit score, decreasing debt and increasing the size of your down payment often helps to create a more favorable picture. Most credit reports contain errors so check your reports from all three bureaus to ensure that the information is accurate.

    Obtaining a pre-approval is the first step in getting the home of your dreams in Huntsville. Get pre-approved today.

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