Step 3 to Buying a Home: Get Pre-Approved for a Mortgage

You've chosen your REALTOR and met with them for a buyer consultation.  The next step is getting pre-approved for a mortgage. This process helps you identify how much you can spend on your new home. This step will be completed before you start shopping for homes. Your REALTOR won't be able to write a complete offer on a home without your pre-approval letter.

Your chosen REALTOR will be able to give you the names of several mortgage lenders you can research.  You DO NOT need to use a mortgage lender provided by your REALTOR. You can do your own research to find a good mortgage lender.  It is also perfectly acceptable to "shop" different lenders to see which lender will provide you with the best loan package and lowest fees. You want a mortgage lender that can explain the process to you, is organized, gets back to you in a timely manner and explores all loan options with you.

Like your REALTOR, your mortgage lender is a very important person on your home buying team.  A bad lender can make the home buying process much more challenging and could end up putting your home purchaee in jeopardy.  In addition, each lender charges different fees.  Once you have completed the pre-approval process, you will be provded with a loan estimate so you can look at what your interest rate will be and what fees you are being charged so you don't end up paying lots of unnecessary fees or a higher than necessary interest rate.

The pre-approval process involves a thorough assessment of your financial situation by a mortgage lender. To initiate the process, you will need to submit a loan application provided by your chosen lender and detailed financial information. The initial list of documents the lender will ask for in the pre-approval process are:

1. Personal identification (driver's license or state issued ID)
2. Two most recent paystubs
3. Past two years worth of W2's
4. Past two years worth of tax returns
5. Past 2 months bank statements from both checking and savings accounts
6. Most recent statements from investment accounts

The lender evaluates your applicatin and the information you provide to determine the maximum loan amount you qualify for and then issues a pre-approval letter. This letter is a valuable asset when making an offer on a home, as it demonstrates to sellers that you are a serious and qualified contender.  Again, your REALTOR won't be able to write a complete offer on a home for you without it.

The pre-approval process not only establishes your budget but also helps identify potential red flags or areas for improvement in your financial profile. Lenders may offer guidance on how to strengthen your financial position, such as paying off outstanding debts or improving your credit score.

Don't let this step in the process of buying a home overwhelm you!  Your chosen mortgage lender will walk you through the process and ask for clarification and additional items when needed.  Like your REALTOR, your lender is on your team with the goal of helping your purchase a home.