This can help determine how much you have the ability to borrow and what type of financing fits you. So why get pre-approved? Time! In today's credit environment, it's more imperative than ever to get a formal loan commitment from your lender in order to guarantee successful financing for your new home.
What to bring for Pre-Approval
Pay Stub(s) covering the last 30 days for all applicants. Continue to save your pay stubs until you close on your loan.
W-2 forms for the last two years for all applicants.
Bank statements for the past two months for all checkings and savings accounts. Continue to save your bank statements until you close on your loan.
Complete 401(k) and IRA statements, if applicable.
Complete investment account statements for the past two months.
Telephone number where employment can be verified.
If self-employed, complete personal and business tax returns for the last two years.
If applying for a NIFA loan, complete personal tax returns for the last three years.
If divorced, complete copy of the final decree, property settlement statement and modifications.
Loan Approval Process: The home buying loan-approval process can be defined by three simple factors:
i. Income - How much can we afford?
ii. Credit Score - How do I improve my rating?
Avoid frequent inquiries into your credit history.
Check your report for erroneous information.
Keep in mind that it can take a couple of months to reflect changes.
Don't close out your older revolving accounts.
Make payments on time.
iii. Cash - Verifiable source of funds
Stocks, Bonds, Mutual funds, Cash value of life insurance, Gifts, secured borrowers fund, 401(k), IRAs etc.
Cash can help! For example, a borrowers debt to income ratio may be outside the normal guidelines. However, the borrower has shown a great ability to save money by putting away his or her 401(k), bank accounts or mutual funds. Because this borrower has shown a great ability to save, they may be rewarded with loan approval.
This is another area that your real estate agent's assistance becomes invaluable. They are the experts in this area, and it is extremely important when selecting an agent to make sure he or she is a professional and is going to represent you to the best of their ability.