Monday, July 7, 2014

The Preapproval Process

What is a pre-approval?
A pre-approval is a commitment letter from a lender or loan officer that confirms a borrower will qualify for a particular loan amount based on income and credit information.  Most pre-approval letters are good for 60 to 90 days.  Most sellers won’t entertain an offer without an accompanying pre-approval letter.
Why you should get pre-approved?
The most important reason for getting pre-approved is to have an accurate idea of how much house you can afford.   This will ensure that you only look at homes that are truly in your price range.   If you know what you can afford before you start looking, you will not become discouraged down the line.  Nothing hurts more than finding that perfect dream home only to discover  that you can not afford it.
A pre-approval letter is also essential in this competitive real estate market.  If you make an offer on a house without a pre-approval, your offer will not be taken as seriously as an offer from another person with a pre-approval (or more likely will be rejected entirely).   All offers are sent out with a pre-approval letter, source of funds, and credit scores.  The exception is for all-cash buyers who only need to show proof of funds and omit credit scores and pre-approvals entirely.
Documents you’ll need to provide to get a TRUE Pre-approval
  • Your W2 from the past two years
  • Your paystubs for the past three months
  • Your tax returns from the past two years
  • Your checking or savings bank statements for the past three months (this will likely have your down payment funds in them as well)
  • Your statements for all your other assets (stocks, bonds, retirement accounts) for the last two months
  • Your current mortgage, tax, insurance and HOA documents if you already own and are purchasing a second home/investment property.
  • If you are self-employed: Your business tax returns for the past two years in addition to your year-to-date profit and loss statement and year-to-date balance sheet
  • Your credit report and score (which I will run for you)
If anyone offers to pre-approve you without ALL of the above documents, you should run!   There is no way to provide a TRUE pre-approval without analyzing all asset and income documentation.
Get Pre-Approved!
Contact me to get pre-approved today.  After looking at your asset and income documentation I can determine your qualification within minutes (with all the necessary paperwork provided).  Once you are pre-approved you can confidently start looking for the perfect place to call home.  Contact me to set up a consultation or if you have any  additional questions about the buying process.

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