WHAT YOU NEED TO KNOW ABOUT PRE-APPROVALS

    WHAT YOU NEED TO KNOW ABOUT PRE-APPROVALS

    Nov 03, 2020

    What is a pre-approval letter?

    Getting a pre-approval letter from the bank/lender means that the lender has reviewed your overall financial situation and believes you are a good candidate to obtain a loan. The pre-approval letter usually includes the amount for which you are approved and the type of loan you qualify for. The pre-approval letter is not a guarantee that you will be approved for a loan but if all things remain the same you should be able to get that loan.

    Is a pre-approval letter the same as a pre-qualification letter?

    No. The pre-approval letter holds a lot more weight than a pre-qualification.

    Pre-qualification

    You may have a conversation with the lender where he asks you to estimate your credit score. Give him/her an idea of how much money you make per year. State how much money you have in savings. All of this information to estimate what you could potentially qualify for and what ballpark price range of homes you should look at.

    Getting a pre-approval requires submitting proof of credit, income, financial status, assets, savings etc. Because proof is required, the pre-approval letter is a better picture of what you can get approved for and what loan you will qualify for.

    Pre-qualification is essentially a guesstimate, pre-approval is a fairly accurate estimate.

    What documentation do I need to provide in order to receive a pre-approval?

    - Copies of W-2 forms

    - Two most recent pay stubs

    - Freelancers: 1099 forms and records of profit and loss for the last two years

    - Bank Statements (Last 60 days)

    - Investment and 401k

    - Monthly debt payments

    - Court Decrees (Divorce)

    - History of Bankruptcy/Foreclosure

    - Down payment gift letters (Is anyone gifting you money to help purchase this home)

    How long is a pre-approval letter good for?

    This letter is usually good for 60-90 days, but can be updated if your information is reverified.

    Will my credit score go down if multiple lenders run my credit?

    Having your credit run multiple times can potentially indicate that you are a higher risk. However, most credit scores are not affected by multiple inquiries within a short period of time. Keep in mind that these inquiries should be for the same thing, for example: if you are having multiple inquiries run for a mortgage loan your credit will most likely not be affected however, if you are having inquiries for a credit card and a car loan and a mortgage then this does not apply.

    Why should I get a pre-approval letter before house hunting?

    Having a pre-aproval letter gives you a clear picture of what you can afford. It would be so disheartening to go looking for homes, find a home that you love and then discover that you can't afford it. Having a pre-approval letter submitted with your offer will also show the seller that you are a serious buyer and increase your chances of getting your offer approved. 

    If you need recommendations for a good Mortgage officer/lender email me @ kat.ashby@ashbyrealtor.com and I will get that information over to you.

    Sources:

    https://www.myfico.com/credit-education/credit-reports/credit-checks-an….

    https://www.nerdwallet.com/article/mortgages/documents-needed-for-a-mor…

    https://www.credit.com/loans/mortgage-questions/how-to-get-pre-approved….