If you’re serious about buying a home, your first step should be getting pre-approved for a mortgage. Your primary reason for doing so is to determine how much you can afford to pay for a home and the approximate amount of your monthly payments. Therefore, you can avoid wasting time looking at homes that are financially out of your reach. In addition, it also shows sellers and real estate agents that you’re not just a casual browser but rather that you are ready, willing, and able to purchase a home.
A mortgage pre-approval is not a guarantee that you will be granted a mortgage from a lender. But it does indicate that you seem to be an eligible borrower based on a lender’s initial review of your income, credit, and assets. It also sets forth an approximate loan amount that the lender predicts you will qualify for. This pre-approval letter is an important document that you will be expected to present upon making an offer on a home. In fact, most sellers will not accept an offer from an interested buyer who has not been pre-approved for a loan.
First, you will need to find a mortgage lender that you feel comfortable with. That lender should have knowledgeable representatives who are happy to answer your questions and provide you with any information you need. Once you have located a lender that you wish to move forward with, you will be required to provide your representative with verification of your employment and proof of income and assets. This generally entails producing W-2 forms, tax returns, and bank statements. You will also have to submit to a credit check. If necessary, you may be asked to explain employment gaps or credit issues.
Stay within your means
Not all applicants want to borrow the full amount they get pre-approved for. Don’t feel pressured to look for a home that would require you to borrow the maximum loan amount. Your goal should be to comfortably make your mortgage payments along with your taxes, utilities, and other monthly expenses. Giving yourself the financial flexibility of not maximizing your budget may be the best decision for you in the long run. You may even consider requesting a pre-approval letter with an amount that is adjusted to your offer, which would keep sellers from knowing that you could spend more.
Beware of expiration dates
Keep in mind that in most cases, pre-approval letters are only valid for two to three months. Mark the date of expiration on your calendar and make sure to provide your lender with updated income, financial, and bank documents in advance of this date in order to avoid delays in closing.
If you have questions about pre-approval, the home loan experts at Cliffco Mortgage Bankers would be happy to help you with the process. Call (516) 408-7300 or consider filling out our short application to start the pre-approval process now.