Real Estate

What it means to be pre-approved for a mortgage

What-it-means-to-be-“pre--approved”-for-a-mortgage

One of the biggest financial transactional is buying a home. You have to spend huge amount of money while buying a single home.  Not only this, home buying process is also very complex.  So there are various steps that make this process simple and one of the crucial step is “ Pre- approval” . Yes you are wondering what is this pre approval term meant. As there is huge competition  in the market so pre approval will help you an edge on the competition once you are ready to make an offer.  When you are searching a home, It will help you a lot. 

When bank interrogates about your credit history and decides you are suitable for a mortgage then it is known as pre approved mortgage.  Not only this if you want to check where your credit card stands you can check from free credit card report card.  But there is one main drawback about pre approved mortgage as it is good for certain amount of time because it signifies that buyer is ready to lend you money.  It also might be a longer process. It starts before you are searching for a home.  First, you have to go to the lender and fill the mortgage application form  and submit some documents related to your financial history.  Then bank will go through into your all financial details and comes into the conclusion how much money you are able to pay.  This will  also help you to buy home at the lower price and you also have the idea how much interest rate you have to pay at the end of the process.

There are two terms:  Pre- Qualified and Pre- Approved . As most of us are aware about pre- qualified term and thinking that both pre- qualified and pre – approved are same. But in real both are different terms.  Pre- qualified involves getting an idea of how much money you can borrow from bank . If you are pre qualified doesn’t mean, bank is ready to give you loan .  For that purpose,  the term” pre- approved is must” .

Check out four things you need to know about pre-approved for a mortgage :

1. Income Proof:

All borrowers have to collect tax returns and W-2 statements of past two years.   One year or two year recent tax return on the situation.  If you are self employed then two year recent tax return are required.

2. Good Credit:

It only depends on the type of loan but also depends on your credit score which should be 620 or higher for government loans but the private mortgage is same if you have a 740 or 620 credit score. It will not get affected.  Minimum credit score like 620 can be used with a bigger down payment for conventional loans.

3. Assets Documentation:

If you have low credit score but your banking accounts can help you to get pre approved mortgage if you have complete documents required.  In many loans, you sometimes need cash for a down payment.

4. Other Documents:

Documents like driving license, social security card, 401k or social security award letter, last two months of your bank statements are required. 

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