Searching for a house can be fun and exciting. However, home buying should not start with visiting an open house. The first step should be approaching a lender and requesting a pre-approval letter. With this document in hand, you will move one step ahead of the other buyers and be able to convince the seller that you are a serious buyer.
So, what is a pre-approval letter?
It’s a single sheet of paper that details the basic terms of the loan regarding how big of a loan a lender is willing to give you. This letter indicates that you are qualified to buy a home and meet all the lender’s requirements. The letter is valid for a certain period and can be used for multiple houses unless your financial situation changes.
The lender looks at your financial profile to make the pre-approval letter. It includes your income, debts, and savings. The lender considers this information to be the amount you can afford to pay back in monthly installments.
The Pre-Approval Process
Find a Lender
Use an online calculator to find out how much house you can afford. This will make it easy for you to choose a lender. Take quotes from multiple lenders before making your decision. Do not choose one based on the amount they are offering. Remember: The bigger the loan, the higher the monthly payments will be.
Submit Your Documents
Apart from your ID, account statements, and proof of income, here’s what else you need to provide:
- Pay stubs
- Past two years’ W-2s
- Proof of any side income
- Details of any other loans you have taken out
- A letter from the person who gave you money for the down payment (If applicable)
Get a free credit report from Experian to ensure no negative markings. If you see any charge that is not supposed to be there, contact the credit reporting bureau and get it fixed immediately.
Your credit score should be in the Good range, higher than 620, if you want a good deal on your loan.
Once all your information checks out, the lender will issue the pre-approval letter, and you can start your search.
Happy house hunting!
Side Note: Getting pre-approved does not take much time. However, if your documents are not in order, you might have to wait a week or more. What delays the process is an audit when the lender sees a red flag. For example, information was concealed, and it got revealed during the lender’s qualification check. Hence, you need to be completely honest when forwarding your information.
Now that you know how much value a pre-approval letter holds, why not get in touch with a lender? As for the rest of the home buying process, visit the Megan Dowdy Realty website. Get in touch with our Dr. Phillips realtor to learn more about the house-buying process. For further information, call on 407-509-9279.