So, you’re ready to buy a home. Step one: talk to a real estate agent, right? Well, not quite. For most of us, the first step we need to take as homebuyers is to get pre-approved for a mortgage. Most real estate agents today will require you’ve taken this first step before they’ll begin to help you find that dream home.
What is a mortgage pre-approval?
In its simplest form, a mortgage pre-approval is when a bank or financial institution takes a look at your assets, debts, and income to determine your creditworthiness. Once their verification checks have been completed, they’ll be able to tell you how much you can borrow and what your interest rate will be.
Why is it important to get pre-approved before beginning your home search?
There are two main reasons why many buyers choose to seek mortgage pre-approval before beginning their home search. First, having a pre-approval letter in hand will make it much easier to find a trusted and experienced real estate agent to work with you. The pre-approval shows them that you are serious about buying a house and not just browsing around willy-nilly.
Second: obtaining your mortgage pre-approval letter is an excellent way to make sellers take your offer on their house more seriously. Once you have that pre-approval, the seller won’t need to worry too much about whether you actually have the financing in place to complete the deal. Thus, your offer will be much more appealing than a similar offer where the financing looks a little less steady.
What documentation will you need in order to be pre-approved for a mortgage?
When speaking to your bank about a mortgage pre-approval, it is a good idea to have all of the following items on hand:
- Recent Tax returns
- Bank statements
- Recent pay stubs
- Stock portfolio statements
- Driver’s license
Depending on your exact circumstances, your lender may request additional documentation, but this list is definitely a good start.
When planning on buying a house, seeking mortgage pre-approval will be one of your first and most important steps. After all, it could potentially mean the difference between buying your dream house or losing out to another buyer.