Essential guide on how to get pre-approved for a house


Essential guide on how to get pre-approved for a house

A homebuyer figures out how to get pre-approved for a house and secures their mortgage

Are you a first-time homebuyer and you’re trying to figure out how to get pre-approved for a house? You’ve found the right place! Securing mortgage pre-approval lets sellers and real estate agents know that your offer is serious and if they accept it the closing process should be smooth.

Mortgage pre-approval comes with some benefits for you as well! You’ll learn the home loan amount mortgage companies think you’ll be able to afford. If you’re interested in getting your new home as quickly as possible, getting pre-approved helps speed the process along as well.

So, now that you understand the benefits, let’s take a look at how to get pre-approved for a house.

Understanding mortgage pre-approval

A pre-approval letter is a document from a mortgage lender stating that they are tentatively willing to lend you a certain home loan amount to buy a house. Preapproval is about as close as you can get to confirming creditworthiness without having the contract firmly in place.

Getting a pre-approval letter shows home sellers that you can secure a mortgage. This is important in competitive home markets where real estate agents and sellers will receive multiple offers. Real estate agents and their clients will likely consider offers with pre-approval letters first.

Applying for pre-approval with multiple mortgage lenders will also help you get the best interest rates. Don’t worry about the extra inquiries on your credit report. When you apply with multiple lenders in a short period of time, the credit pulls should count as a single inquiry.

Now, we’ll answer how to get pre-approved for a house.

How to get pre-approved for a house: The preparation

The first step in how to get pre-approved for a house is to prepare all the documents you need. Mortgage lenders will need to verify you have a steady source of income and the ability to make monthly payments. Here are the documents needed for mortgage pre-approval:

  • Names and addresses of your employers
  • W-2 income tax statements for the last two years
  • Form 4506-C (the mortgage company should give you this form)
  • Pay stubs from the last 40 days
  • A copy of your social security award letter along with a recent check stub or copy of a bank statement (if this applies to you)
  • Form SSA-1099 for disability income from the two most recent tax years (if applicable)
  • Check stubs and any forms showing duration of pension payments (if applicable)
  • Proof of alimony, child support, or seperate maintenance income (if applicable)

Extra documents needed for mortgage pre-approval for self-employed applicants:

  • Most recent two years of personal tax returns and any business returns you filed for your company
  • Year-to-date business profit-and-loss statement for current year if more than three months have passed since the end of the tax year

Other documents your lender may ask of you:

  • Your current balance sheet including all pages and schedules (they will not need copies of your state returns)
  • All recurring debts such as credit cards, current mortgages, home equity lines of credit, student loans, auto loans, alimony, child support, etc.
  • Gift funds, including a gift letter and evidence or transfer or withdrawal
  • Stocks and securities account statements for last three months
  • Settlement statement if using funds from the sale of property
  • Proof of sale and proof of funds transfer for the sale of other large assets
  • Rental property income found in tax returns for the last two years verifying the income and provide leases if possible
  • Brokerage statements for the last two years showing Schedule B interest and dividend income

Improving credit issues before mortgage pre-approval

Improving your credit score is also an important step in how to get pre-approved for a house. This can take a while, so be sure to keep an eye on your credit as soon as you think of buying a house and applying for a mortgage.

  • Continue making monthly debt payments on time
  • Don’t open too many new lines of credit in the same timeframe
  • Keep your credit utilization rate low (below 30%)
  • Monitor your credit reports and report any inaccuracies

Oft forgotten tip on how to get pre-approved for a house

While the above information is the common instructions given by mortgage lenders, there’s another tip we can provide on how to get pre-approved for a house.

Being honest about your financial situation with your prospective mortgage lender gives them the opportunity to give you the best practices to fix it. Further, misrepresenting your finances can lead to unwanted consequences such as fines and imprisonment. If your pre-approval application has incorrect information, underwriters will likely find them. This not only slows down the pre-approval process but it could also lead to damage your reputation with the lender and they may even refuse to work with you. You want a good relationship with your lender because they could even suggest the best home loan types for you to get you a better deal.

If there’s still questions you have on how to get pre-approved for a house, you can always give us a call at 417-326-4270. Our agents help homebuyers get pre-approved all the time in many different financial situations!

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