What You Need To Be Pre-Approved For A Home Loan

The days of so-called "no-doc" loans are long over, and now even loan pre-approval applications require a lot of paperwork. For applicants, this means gathering and organizing the below items. Doing so will help things go smoother and potentially speed up the process with home loans.

What is a Loan Pre-approval?

While not required, most buyers take this preliminary step before they begin their home search. While a loan pre-approval is no certain guarantee that you will be later be approved for a mortgage, it raises the odds. With a pre-approval, buyers can identify troublesome issues, correct credit mistakes, and find out how much home they are comfortable with purchasing based on their budget. Mortgage loan pre-approval letters let sellers know that you are very likely to be approved for a mortgage and to subsequently be successful in closing the deal. That may give buyers a boost over their competition in a tight market. The below list of information needed to do a pre-approval is almost identical to that needed for the loan application. Gathering the below only has to be done once, but the paperwork for the pre-approval and the loan has to be done twice.

Proof of income – You should be ready to show the last two years of income, in most cases. If you are self-employed, work seasonally or sporadically, you might have to provide more than a couple of years information. The lender primarily wants to see pay statements, bank statements, 1099s, or income tax returns.

Employment stability – Lenders prefer applicants who have been in the same job or at least the same general industry for several years – often two or more years. The same proof you used with income will suffice but keep in mind that the lender is looking for someone with a good, steady record of employment. Contact information for your employer must be provided and it will be checked.

Permission to perform a credit check – One of the primary tasks with a loan pre-approval is a hard inquiry on your credit report. The score needed depends on the loan amount, the type of loan you might apply for, and more.

Proof of identity and residence – This can be satisfied using your picture I.D., lease or current mortgage paperwork, or utility statements.

Financial holdings – The loan risk to the lender is tempered by applicants with healthy bank account balances, investments, retirement accounts, other real estate ownership, and more. Be ready to show proof of all financial assets.

Once you gather the above, you will be able to easily apply for both a pre-approval and the loan when the time comes. The result will provide you with the ability to focus on finding the right home for you. To find out more, speak to a lender.