HOW TO GET A MORTGAGE PRE APPROVAL
A mortgage pre approval, is something that you might have heard other buyers and lenders talk about, as being vital for your chances of being able to buy that dream house.
But you’re not quite sure what it is. Here, we will outline the major points about what one is and how you go about obtaining it.
First off, a word or two about what it isn’t.
PRE APPROVAL OR PREQUALIFICATION?
There may be a bit of confusion in your mind around some of the terms.
Prequalified and pre-approval might seem like the same thing, but they are not.
Getting prequalified simply means little more than a chat with a lender about how much you could expect to borrow. Important as a preliminary, but really, not much more than that.
A pre-approval is a bit more in depth.
In most cases, you will probably be required to produce the same amount of documentation as you will do for your final application.
In general, it will probably help you considerably to have all these documents, ready scanned in and uploaded to some (secure) cloud drive, in readiness of your application.
DOCUMENTATION NEEDED TO GET A PRE APPROVAL
The list of documents needed in order to be pre approved by a lender for a mortgage, is a fairly extensive one. It will most likely include most of, if not all of, the following items;
- PROOF OF INCOME
This one is fairly obvious, but you should be ready for it all the same. Proof of income will entail things like;
- Pay checks
- Two years of tax returns
- Any additional income i.e. alimony, pensions etc
- MONTHLY BILLS EXPENDITURE
Although the bills in your new property may differ, a lender will still want to see the amount you are paying out now as a guideline.
This should not just include utilities fixed at your home address, but all your monthly outgoings. So things like contract phones, credit cards and anything else that you pay regularly.
- YOUR ASSETS AND DEBTS
Proof of any assets, property, cash sums and also, debts such as student loans and credit cards, need to be disclosed and documented.
- BANK STATEMENTS
Obviously, you should be expecting to keep any bank statements as proof to your lender. The same also applies to any other savings accounts or bonds you may hold.
- INCOME FROM RENTAL
If you are receiving rent from a property that you already own, this should be documented also.
- PROFIT AND LOSS STATEMENTS
If you are self employed, in addition to your tax returns, you will need to provide a profit and loss balance sheet to your lender.
Be warned, the self employed may also face additional hoops to jump through, depending on your lender.
- PROOF OF EMPLOYMENT
Unfortunately, simply seeing the pay slips may not be the end of the matter. Your lender may wish to see a letter verifying your employment with your employer.
- PERSONAL DOCUMENTS
Make sure you have got your driver’s license, social security number and proof of things such as your current address handy.