Getting Pre-Approved is the next step in finding your new home. One of the best things you can do to ensure in getting your dream home is getting pre-approved for a mortgage loan.

What does that mean and what are the steps to getting pre approved?

Mortgage pre-approval is basically a promise from the mortgage lender that you’re qualified to borrow up to a certain amount of money, at a specific interest rate, and subject to certain terms.

Getting pre-approved doesn’t have to be as complicated as it sounds. To be pre-approved, you’ll need to send in a preliminary application to a lender. In this process, the mortgage lender will look closely at your financials such as credit score, income, assets and determine what loan you can qualify for.

Here is the documentation you’ll need to begin the process to see which loan you are qualify for:

• Paystubs – Most recent 1 month
• W’2’s – Most recent 2 years
• Tax returns – Most recent 2 years
• Bank statements – Most recent 2 months
• Asset Information – Investment 401k/statements
• Copy of your driver’s license
• Mortgage statement

Keep in mind that getting pre-approved is different from being pre-qualified.

Pre-qualification is merely is an estimate and gives you a general idea of the price range you can afford. Although pre-qualification doesn’t bring you any closer to securing a mortgage, but is crucial and a vital tool to give you insight.

Pre-approval occurs when the lender has reviewed your credit and believes that you can finance a home up to a specific amount. This will determine what loan programs you qualify for, the maximum amount you can borrow and the interest rates you will be offered.  There is no obligation to accept the loan the lender proposes for pre-approval, but the information you gain from being pre-approved will also help you understand the costs involved when purchasing a home.

Why is it important in getting pre-approved?

When you’re ready to make a purchase offer on a home by showing proof of your pre-approval letter to the real estate agent and the seller will be taken serious in securing a bid. A pre-approval on a mortgage last 60 to 90 days depending on the lender. Being pre-approved by a lender can therefore put you in a much stronger negotiating position, because it shows the seller that you are financially capable of buying and more likely to close on the property. Especially in a competitive housing market, sellers prefers a pre-approved buyer to close the deal.