It's no secret that getting a mortgage pre-approval is key to a successful home purchase.…
Getting a Kansas city mortgage pre-approval upfront is an important first step. With pre-approval, you and your lender know precisely your budget. Shopping for a new home should be an exciting time in your life. But finding a home that you can’t qualify for can put a damper on your home-buying journey.
But how do you get mortgage pre-approval? You should follow some basic steps and necessary paperwork to make the process quick and straightforward.
Let’s get into it.
Mortgage Pre-Approval Made Simple
You can increase your odds of receiving mortgage pre-approval by having the essential paperwork and information prepared.
Credit Score and Reports
Your credit score is crucial in almost every financial decision you make. Your credit score will impact many loan variables, including the interest rate, loan limit, and approval.
A high credit score and clean report show lenders that you are a responsible and trustworthy candidate. Kansas City Mortgage lenders will feel more confident offering you pre-approval if you have a history of consistently paying on time.
Your credit score shows if you are a reliable candidate for mortgage pre-approval based on your history with payments. But your income information is equally as important.
Consistent income will show that you are currently making income and the likelihood of continued employment. No one wants to loan money to someone who makes little to no money or has unstable work history.
Proof of employment includes pay stubs, W2 forms, and in some cases a letter from your current and previous employers. It’s not a bad idea to bring proof of additional income, including Social Security payments, VA benefits, child support, alimony, or a second job.
Assets are another essential component in the mortgage pre-approval process.
Aside from your income, lenders are interested in any additional money you currently have or are in line to receive. Assets include stocks, investments, and even gifted funds from family and friends.
Bring any documentation that shows your additional assets.
Your mortgage lender needs to verify your identity and paperwork.
The lender will need proof of identification when discussing your pre-approval qualifications, which can be a valid driver’s license.
You’ll also need your Social Security number, and lenders will likely run their credit check at this time.
This step in the mortgage pre-approval process links back to the first item on our list about income information.
Your lender will want to know that you are gainfully and consistently employed. Current employment is often not enough, and you’ll need to have a consistent track record.
Lenders may ask your employer about your last pay raise, future pay raises, and the probability of continued employment.
Mortgage lenders want a guarantee that you’ll have employment throughout homeownership.
Things to Know About Mortgage Pre-Approval
We’ve covered what paperwork and information are needed when meeting with a potential lender, but you should know other important things before beginning the application process.
Learn More: Mortgage Documentatipon Checklist
The Difference Between Pre-Qualification and Pre-Approval
Both of these processes can help you budget for your new home. Pre-qualification gives you a general idea of the amount of loan you might get.
Pre-qualification is usually the step before you apply for pre-approval and can be completed online or over the phone without a credit check. The lender will ask questions regarding your income, a possible down payment amount, assets, and debt.
Based on this information, you can receive a very loose idea of what type of loan and terms you could qualify for.
Mortgage pre-approval is when the actual figures, amounts, and credit reports are considered and used to determine eligibility.
The Pre-Approval Meeting
You can apply online, call us, or schedule an appointment for pre-approval. After the application, the lender will determine whether or not you are a good candidate for a loan.
You will receive what’s called a Loan Estimate (LE). The document outlines the terms of the loan. Here you’ll see the mortgage rates, closing costs, and what type of loan it is. We will review all loan options to ensure you obtain the best financing for your goals and situation.
Pre-Approval is Not a Guarantee
Just because you have received a Loan Estimate doesn’t guarantee to receive the loan; it simply means you’ve been pre-approved to get one.
A commitment to the loan by the lender usually comes after the home you are considering has been appraised. An appraisal ensures you aren’t paying above market value for the home.
The appraisal also assures lenders that if you default on the loan, the lender can sell the property for an amount that will make them whole again.
Final approval comes after an underwriter has reviewed all requested documents related to your income, assets, credit, and appraisal.
Pre-Approval is Worth the Time
You might be thinking that the pre-approval process seems drawn out and unnecessary. Perhaps you believe pre-qualification is enough.
Though pre-approval does take some time, it is well worth it in the end. Once you receive your Loan Estimate, you can compare and consider several lending options.
Lenders may be willing to offer you a lower interest rate, which is an essential factor in purchasing a home. Applying with several lenders will help you spot the best deal.
Another critical fact to note is that credit scoring recognizes multiple credit checks in a short period as a part of the loan-shopping process. You won’t receive penalties for doing so.
Let Us Help You Buy Your Dream Home
If you’re in the market for buying a new home and aren’t sure where to start, let us help.
Contact us today for additional information, and let us make homeownership a breeze.