FAQ : Why Is Your Pre-Approval So Important Before You Start House Hunting?
We cannot think of a better analogy than this one from BankRate.com when it comes to house hunting before getting a pre-approval for a home loan: “Shopping for a home before getting preapproved for a mortgage is the equivalent of walking into a grocery store without a wallet.”
Why Should You Get Pre-Approved Before House Hunting?
There are a few major advantages to getting pre-approved before starting the house hunting process. In addition to knowing what you can afford and saving yourself (and your realtor) time by not looking at houses that are out of your price range, you can also:
- Get your lender’s perspective of the local marketplace.
- Show your real estate agent that you are serious about buying.
- Influence any offers you put in by showing the seller that you have already done the necessary legwork.
- Learn about any financial alternatives that may be necessary for your situation.
- Save yourself time between finding your dream home and submitting your initial offer because you will have already done the necessary paperwork.
What Do You Need To Have In Order To Get Pre-Approved Before House Hunting?
For most lenders, the pre-approval process requires the following documentation:
- Proof of income. These can include W-2 statements for the last two years, recent pay stubs for year-to-date income, proof of additional incomes (alimony, child support, bonuses, etc.), and your last two years of income tax returns.
- Proof of assets. Generally speaking, bank statements and/or investment account statements are necessary. Proof of any cash reserves will also be required.
- Good credit. Different lenders have different cut-offs for what they will approve, but generally speaking, the best interest rates are reserved for customers with a credit score of 740 or above. FHA loans generally require a credit score of at least 620. Any borrowers with a score below 580 are bound to have a tougher time getting approved and are generally required to make a larger down payment.
- Verification of employment. Most lenders not only require proof of income, but they will also want to verify with your employer that you are still employed and exactly what your salary is. If you have recently switched jobs, they may even contact previous employers. For self-employed individuals, more paperwork may be required.
- Identification documentation. This may be the easiest of all the requirements, but lenders will want to see a copy of your driver’s license and social security card.
How Long Is A Pre-Approval Good For?
A pre-approval letter from a lender is generally applicable for 60-90 days and can be “renewed” or updated by re-verifying some of the documents.
Why Does Your Real Estate Agent Want You To Be Pre-Approved Before House Hunting?
Real estate agents prefers to work with pre-approved house hunters because they know that they are serious about purchasing a new home and they know that the offer process and closings will potentially go much more smoothly.
If you and your family are getting ready to start house-hunting for a new home or are preparing to sell your home, contact the Fairfield Team and we can help you get started or answer any questions about the process!