Potential buyers benefit in several ways by consulting with a lender and obtaining a pre-approval letter. First, they have an opportunity to discuss loan options and budgeting with the lender. Second, the lender will check the buyer's credit and unearth any problems. The home buyer will also learn the maximum amount they can borrow, which will help set the price range.
- Proof of Income - W-2 wage statements from the past two years, recent pay stubs, proof of any additional income, and the two most recent years' tax returns.
- Proof of Assets - The borrower needs bank statements and investment account statements to prove that they have funds for the down payment and closing costs, as well as cash reserves.
- Good Credit - Most lenders require a FICO score of 620 or higher to approve a conventional loan, and some even require that score for a Federal Housing Administration loan. Lenders typically reserve the lowest interest rates for customers with a credit score of 760 or higher.
- Employment Verification - A lender will not only want to see a buyer's pay stubs but also will likely call the employer to verify employment and salary. A lender may want to contact the previous employer if a buyer recently changed jobs. Self-employed buyers will need to provide significant additional paperwork concerning their business and income.
- Other Documentation - The lender will need to copy the borrower's driver's license and will need the borrower's Social Security number (SSN) and signature, allowing the lender to pull a credit report.
The more cooperative you are, the smoother the mortgage process, so be sure to read this article to be prepared for gaining that pre-approval letter.