What is Mortgage Preapproval? A Checklist

what is mortgage pre-approval?

 

If you’re just beginning to seriously consider purchasing a home, you have probably seen a new term and wondered: what is mortgage pre-approval? Mortgage pre-approval results from a process that scrutinizes your financial situation and determines whether or not you are going to qualify for the level of loan you’re applying for.

Let’s say you want to buy a $400,000 house. You’re probably not going to be taken seriously by the seller if you don’t have a pre-approval letter in hand saying you’ve been vetted and can immediately afford to purchase a home worth at least $400,000.

If you don’t arrive to the table prepared with this essential document, your offer is going to be ignored in favor of offers that come from pre-approved buyers.

Before you try to be pre-approved, you should have a clear idea of how much house you can afford. Narrowing your house search from the outset may prevent you from falling in love with a type of home or neighborhood you can’t yet attain.

Follow our checklist to optimize your opportunity for pre-approval. Being organized and paying attention to the details will help you move through the pre-approval process smoothly and quickly.

  • Copies of Drivers’ Licenses and Social Security Cards
    • All buyers who will be on the loan must submit copies of their license or other valid state identification along with copies of their social security cards.
  • Copies of Most Recent Bank Statements
    • All buyers must submit all of their most recent bank statements. Be very honest about what you have, what you owe, and how much you may be owed by others. Anything you try to hide is very likely going to be discovered, and your reputation will be damaged as well. If you’re honest and straightforward from the start, it will work to your advantage.
  • 60 days of your most recent pay stubs
  • Account statements from all investment and retirement accounts
    • This applies whether or not you’ll be relying on these funds to purchase your home. Having available money set aside safely will help assure lenders that you will be able to pay your mortgage even if you experience a change in employment, for example. If a potential buyer is barely making it from paycheck to paycheck, it’s going to be more difficult for them to qualify.
  • Mortgage statements and property tax bills for any other properties you own
    • If you hold a mortgage on any property, you’ll need to let us know how much you pay per month. This helps us calculate your debt-to-income ratio (DTI). You’ll want to have a healthy chunk of equity built up before you take on another mortgage; if you’re just even or underwater, it may be difficult to qualify.
  • Tax Returns (1040 form)
    • Your last two tax returns will let us see your address, employer, and income level directly. Hopefully you’ve already got a PDF you can send us, but if you don’t, set aside a bit of time and get those pages scanned, saved, and sent over.
  • W-2 or 1099 forms
    • These forms will show us how much you were paid over the last two years.
  • Profit and Loss Statements
    • For those of you who run a business or are fully self-employed, you’ll need to show us your profit and loss statements from the last two years. You may potentially need to present statements from your business bank account(s) as well.

Remember, in this competitive market, your offer is only going to be considered if you have a confident pre-approval from a trusted lender. When you’re pre-approved by the Joe New Team, our impeccable reputation for only approving mortgages we are able to fund will help set your offer apart from the rest.

Because the Joe New Team always submits all necessary paperwork to the title company 72 hours ahead of time, you can place offers confident that your ducks are all in a row. We hope to help you experience the joy—not the stress—of buying a home, fully confident that your finances are secure.