A mortgage is a heavy weight on many shoulders when you go in blind. Don’t get a loan without knowing what you’re getting yourself into. Before you apply and get pre-approved for a mortgage, know what you need for your loan.
What Does Pre-Approved Mean?
In today’s competitive housing market, sellers and realtors will want a pre-approval letter in order to take you seriously as a potential buyer. Getting pre-approved for a loan means that you’ll most likely have the capability to purchase the home. Show you can close the deal with a pre-approval.
Getting a pre-approval means that your lender believes you have enough to make a down payment. It also means your lender has checked that you have sufficient income to afford the mortgage payments. The home must be appraised at equal value, or more than, the total of your loan.
Before you apply for a pre-approval, you’ll need necessary documents.
Annual Credit Reports
A copy of your annual credit report will show your lender that you can make payments consistently. A good credit score means you’ll likely be able to get a higher loan amount. This also factors in your income. You can always look up your credit score online, with free resources. Your credit will allow lenders to evaluate your financial situation in order to get you closer to your pre-approval.
Your income is a large portion of determining how much your loan will be approved for. Depending on how many years you finance for, lenders want to know you make enough money through your income to consistently pay your mortgage. Pay stubs, tax returns, W-2 forms are just some of the few documents you can share with your lender to prove you are stable enough to afford the mortgage loan for your new home. If you’re receiving money from a family member, you want to bring documents regarding that as well.
Assets Aside From Your Income
Receiving money from a family member or friend is an example of an asset outside of your income. Bank accounts and investments are also a great way to show the lender how much you have. The more you have to show, the better your pre-approval will be. Although this seems like long process, having your documents in order will organize the chaos of applying for a mortgage.
Lastly, your lender will want to know that you are who you say you are. Your personal information will show your lender that you’re not committing fraud. A form if ID such as your driver’s license or passport will do. In order for the lender to check your credit, you will have to provide your social security number.
Having a mortgage loan is a commitment of financial payments. Your mortgage will affect your credit score as well. When getting a mortgage loan, be sure that you can comfortably afford your payments.