Define your budget
Before starting your home search, it is a good idea to speak with a Mortgage Lender and obtain a written preapproval letter for a loan. This is why:
• It gives you a more concrete idea of how much you can afford to pay and helps you better define your search criteria.
• It helps to determine your purchasing power so you can act quickly and with confidence when you identify the property you would like to purchase.
• It gives you an advantage in negotiating on a home because it assures the seller that you are qualified to purchase. This is especially helpful when you have competition from other interested parties.
• It expedites the buying process after your offer is accepted. It is helpful to understand the difference between a pre-approval and pre-qualification.
• Pre-qualification: A quick procedure to estimate a loan amount for which you might expect to be approved. It uses only information you provide to the lender and it does not involve a credit report or an in-depth look at your finances. For this reason, it does not carry as much weight as a pre-approval letter.
• Pre-approval: For a pre-approval, you will complete a mortgage application and the lender will require information and documentation to determine exactly how much they would be willing to lend you. The information the lender will request for a pre-approval includes:
- Recent pay stubs
- Last 2 years’ W-2s
- Last 2 Federal Tax Returns
- Two months’ worth of bank statements for all types of accounts
- Most recent quarterly retirement statement
- Your credit report
