Getting pre-approved for a mortgage is an important first step towards buying a home. This pre-approval letter will let you know the upper limit of your budget and will also help to show sellers that you are serious about buying a home. However, you will need to make sure you check all the boxes before you can get pre-approved for a home loan. Make sure that you have all of these things in order before making an appointment to speak with a lender.
Thing You Need #1: Information on all loan applicants
If you will have a cosigner on your mortgage, you will need to make sure that you have personal information for yourself and your cosigner. The lender will need a social security number for each applicant. This will allow the lender to pull each party’s credit report, giving them an idea of whether or not the applicants are reliable borrowers.
If you have negative factors affecting your credit, now is a good time to take care of those derogatory marks. A high debt to income ratio can affect pre-approval, so it is usually a smart move to pay down existing debt before meeting with a lender.
You will also want to make sure that you have cash in the bank since a lender will often request a copy of each applicant’s bank statements.
Thing You Need #2: Proof of income and proof of employment
A stable income is one of the most important factors that your loan officer will take into account. If you have a long-term, stable source of income, you will be more likely to make your payments on time and in full each month. This makes lenders more comfortable offering you a larger mortgage. It also reduces the risk to the lender, allowing them to offer you a lower interest rate than someone with a less stable income.
Proof of employment goes hand in hand with this. At the minimum, you will need names, phone numbers, and addresses for your current and recent employers. A letter from your employer stating how long you have worked for the company is also sometimes required. Include this letter with your other documents when filling out a mortgage application.
Thing You Need #3: Tax documents
In addition to wanting to see proof of income and proof of employment, your lender will also want to see your most recent tax documents. These documents include your W-2s, which show both current and previous income information. In many cases, the lender will ask to see your documents for the last two years to get a better long-term picture of your finances.
Thing You Need #4: List of prior residences
Your lender will also want to know where you currently live and where you have lived for the last few years. If you have an eviction on your record, this can be a major red flag for lenders. However, if your previous landlords give you good references, this can be a good indicator that you will also be a responsible mortgage applicant.
To learn more about the steps you should take before buying a home, reach out to one of our team members.