Before You Buy: Home-Loan Pre-Approval

If you are serious about buying a house, before you even start hitting the listings, there is an important step to take – the home loan pre-approval.

That’s because sellers are more inclined to work with buyers who already have the financing in their back pocket. 

And for buyers, getting pre-approved tells you exactly how much money you have to work with, so you can shop for homes in your price range.

Before we dive into the process, it is essential to note the difference between the terms pre-approved and pre-qualified. 

When you are pre-qualified, you receive an estimate of how much you can borrow. This is the first step in the process.

When you are pre-approved, you then have the loan amount that you are eligible for. Pre-approval is important because sellers then know you have secured your financing. A pre-approved buyer is favored over a pre-qualified buyer.

What You Need for Home Loan Pre-Approval

You’ll need to check off these five boxes:

1. You have verified employment. If you recently switched jobs, lenders will likely look to your previous employment.
2. You have proof of income. You will typically need to provide two years of W-2 wage statements, along with recent pay stubs. If you have additional income as well, then you will also need to provide recent tax returns. 
3. You have good credit. This is a FICO score of 620 or higher. The higher your credit score, the lower the interest rate you may qualify for. 
4. You have proof of assets, such as bank statements.
5. You have additional documentation, such as a driver’s license, that you can easily provide. Other documentation is typically used to pull your credit report.

I Have All That, What’s Next?

Now it’s time to do a little research and planning before you start the pre-approval process.

What’s Your Budget?

Take a look at your budget to determine how much you believe you can afford to pay for a monthly mortgage payment. Be realistic so you can be careful about overextending yourself. You can use our VA loan calculator to see how much your estimated monthly payment would be based on your desired loan amount.

What’s On Your Credit Report?

Review your credit report, so there aren’t any surprises when the lender discusses it with you. If you find any errors, this is an excellent time to get them corrected.

What’s the Current State of Your Finances?

Look at how much debt you have and pay down what you can. Padding your savings account is also a good idea before applying for a home loan pre-approval.

Organize Your Paperwork

Get all of your documents in order. Make copies or print-outs of what you need and organize them in a folder.

Contact a Lender

Now that you have everything in order, you can contact a lender who can begin your pre-approval. You can expect to get pre-approved for a home loan in 1 to 10 days, and it is typically valid for 60 to 90 days. 

At National Home Loans, we are happy to guide you through the home loan pre-approval process. Give us a call today at (858) 227-7447.