Pre-Approval: Why is it so important?
Pre-approval is the most important step when starting your homebuying journey!
Getting pre-approved for a home should not only be the first step to your homebuying journey, but it is the most important step. Pre-approval is the process of determining how much home you can afford based on a review of your credit, income, assets, and other factors that could be relevant to your specific loan program guidelines.
But why is it so important?
Pre-approval is what kicks-off your house hunting journey because it determines your price range. Knowing how much you can qualify for and getting an estimate for monthly payments is key to determining the budget of homes that you will be touring to purchase.
With a pre-approval letter, your offer will stand out more than your competition who are not already pre-approved. You are demonstrating that a lender has reviewed your creditworthiness and qualifications for the purchase amount.
Lastly, you can assess possible issues early on when you get pre-approved. Your Loan Originator will be able to detect what problems may make it difficult for you to obtain a loan. Having a low credit score could be detected early, but also could be fixed with the recommendation of credit repair help from a professional.
What are the requirements for pre-approval?
Your income: Most recent pay stubs, W2s/1099s from the past two years, and retirement/social security documents. If you are self-employed, you will need the most recent two-year tax returns.
Your assets: Past two months of bank statements, or confirmation of the source of assets for closing.
Credit Check: A copy of your ID, Full name, Social Security Number, Date of birth, and Current address.
Other Factors: Additional documentation may be requested based on your specific loan program and/or your individual circumstances.