Getting pre-approved for a mortgage is a process that determines whether you qualify for a home loan. It's important to do this before you start seriously shopping for a new home, as many sellers will expect you to have an approval in place before making an offer.
Here are the steps you need to go through to get pre-approved for a mortgage:
1. Provide Proof of Income
The first step in getting a mortgage pre-approval is to meet with a lender and provide proof of your income. For people in regular employment, this will probably involve showing your pay stubs. You should also be prepared to show two years of federal tax returns and W2 statements. Finally, you'll need to show a 60-day or quarterly statement of your checking, saving and investment accounts.
2. Prove You Can Cover the Down Payment and Closing Costs
When you buy a home, you have to provide a down payment to secure the property, as well as closing costs on the sale. Lenders want to know how you're planning to meet these costs. They don't want people paying their down payment with borrowed money, so you'll need to show a paper trail for the money you plan to use.
3. Pass a Credit Check
Your credit score not only determines whether you can get a mortgage pre-approval, but it also affects the interest rate of the loan. Borrowers with credit scores above 740 typically get the best interest rates, while those with scores below 580 face higher rates and may be required to make larger down payments. Check your credit report before you apply for pre-approval and ask a good mortgage loan originator for more information so you know what to expect.
4. Confirm Your Employment
Let your employer know that they might be getting a call from your mortgage provider to check you are still employed. If you're self-employed, you'll need to provide documentation showing that your business generates a stable income.
5. Confirm Your ID
Mortgage providers have to confirm your ID before they can lend you money for a home. You'll need to show an ID card or driver's license and provide your Social Security number. Make sure you have all these documents ready when you begin the pre-approval process.
Want to get pre-approved? Learn what you shouldn't do when applying.
