Talking to a lender and get pre-qualified before beginning your home search is highly recommended. It lets you know what homes not to fall in love with and makes your offers stronger.
Pre-qualification
Pre-qualification is an early step in your homebuying journey. When you prequalify for a home loan, you’re getting an estimate of what you might be able to borrow, based on information you provide about your finances, as well as a credit check. Obtaining a pre-qualification letter from your lender improves the strength of your offer. The letter will mention contingencies of providing bank statements, W2s, tax returns, appraisal results, title work, etc.…
Pre-Approval
Pre-approval is later step which asks for proof of all the verbal information you provided to the loan officer. Once the documentation has been provided, the lender will have their underwriting department review it. Sometimes underwriting (the approval/risk assessment process) will need a few extraneous documents to approve the loan. When the lender provides a pre-approval letter, it usually will only have 2 remaining contingencies, appraisal amount meeting or exceeding the purchase price and title commitment.
Documents needed for Preapproval
- Personal identification
- Tax returns
- Verification of income – Pay Stubs, W-2’s, 1099’s
- Employment verification
- Proof of assets
- Mutual fund and stock ownership verificationBank statements401 (k) statements
- IRA statements
- Credit history and score
- Rental history
- Debt balances: Current mortgages or home equity loans, Car loans
- Any other requested documents