The Ultimate Guide to Getting Pre-Approved
Beginning the journey to buying a new home may be both exciting and daunting. There are many twists and turns in your path to finding the right home – and the right home loan.
When you are ready to begin the serious search for your new home, you should start by getting pre-approved for a home loan. This gives you a leg up in a competitive homebuying market to show sellers you are ready and able to make a legitimate offer. Here is a comprehensive guide to the home loan pre-approval process to get you on your way.
Pre-Qualified Versus Pre-Approval
There is a significant difference between being pre-qualified and pre-approved when it comes to a home loan. Pre-qualified buyers have applied or verbally given a lender basic information about their finances and have met the basic criteria to qualify for a loan. Pre-approval is much more in-depth. Lenders will pull a credit report, verify income and investigate the credit history of the applicant. When you are pre-approved, you will be given documentation of this fact that you can provide to buyers and real estate agents to show you have gone through this preliminary stage of obtaining a home loan.
Preparing for Pre-Approval
Before you talk to lenders about getting pre-approved, it is worthwhile to prepare for the process. You should know what the lender will need and what they will find when they look at your credit history and income. Before you approach a lender to begin the pre-approval process, here are some preparation steps to take.
Check Your Credit Reports
You need to know what lenders will find when they look at your credit reports. Pull a report from all three credit bureaus – you want more than just your score. Check for accuracy in all your history. If there are any negative discrepancies, you want to have these resolved before attempting to get a home loan.
Determine Your Desired Loan Amount
How much do you plan to spend on a new home? You need to have a ballpark figure of what size loan you will require and how much money you are able to put down on your new home. You should also consider what monthly payment you desire.
Gather Income Documentation
One of the main elements of the pre-approval process is verifying your income. You will need to bring documentation of your income to the lender. Gather the different forms of income proof you will need. These may include:
- Recent bank statements
- Last two paycheck stubs
- Tax returns for the last two years and W-2s for wage earners
- Investment documentation – retirement accounts, stocks, bonds, etc.
- Current profit and loss statement and 1099s for the last two years for self-employed individuals
- A list of all your current expenses and debts
- Divorce or child custody court paperwork and any related income documentation
- Documentation of any real estate income or assets
By preparing ahead of time, you will be ready to answer any questions and ensure the pre-approval process goes as smoothly as possible.
What to Expect During the Pre-Approval Process
When it is time to seek pre-approval for a home loan, you will want to ask what documentation a lender requires. Most likely you will need your income, asset, and debt information, along with identification, to begin the process. The lender will ask for permission to pull your credit reports and there may be a fee to be pre-approved for the home loan.
Pre-approval for a home loan can take as little as a few days up to a few weeks. This is much more in-depth than becoming pre-qualified; the lender is verifying various aspects of your income and credit history to determine whether you are a viable candidate for a sizable loan. Once the underwriter for the lender has reviewed all your information, you will either be approved and given a letter of pre-approval for a designated home loan amount, or you will be denied or asked to provide more information. Once you are pre-approved, your status is usually valid for 60-90 days with the lender, depending on their terms.
Advantage of Home Loan Pre-Approval
When you are pre-approved for a home loan, you can begin looking at homes in earnest and sellers will take your interest seriously. You have the advantage over those who have not been pre-approved when it comes to making an offer – you can prove you have met the criteria for securing a home loan and are one step closer to actual approval for your home loan. While pre-approval is not the same as approved, it is as close as you can be before going through the final home loan process.
If you are ready to begin looking for your next home, get pre-approved through Galaxy Lending Group. We offer a variety of home loans and competitive rates to meet your needs. Apply online or call us to begin the pre-approval process to begin your journey to buying the home of your dreams.