When you are seriously looking around for buying a home then it is better to consider financing options. You need to get an appraisal, which can give an idea of the amount you can spend. Besides, the sellers also get to know that you are serious about buying a house. Here, you can take assistance from the mortgage prequalification and preapproval process.
What is mortgage prequalification?
It is a wise step to be taken at the start of your home search journey. It quickly gives you an estimation of the mortgage amount you can borrow. Just share your basic financial information with the lender.
Sammamish is one of the best mortgage companies that have been in the lending business since 1992. It is a family business that lends in Washington, Colorado, Idaho, and Oregon. You can give them your estimated income and debt. In minutes, you can get an estimation price range you can get approved as a loan.
The lender does not verify the information provided, so your credit score will not get affected. Nevertheless, it also means that the amount shown in the prequalification process can be more than what you plan to spend.
Start the prequalification process before you initiate house shopping. It boosts your confidence and you look for homes in your budget price range.
What is mortgage pre-approval?
Pre-approval means making the mortgage amount official. In the pre-approval process, you will offer the lender detailed financial information.
- Proof of your income – You will need to offer the past two years’ W-2 statements and current payslips to show updated income, extra income proof [bonuses], and tax returns of the current two years.
- Proof of your assets – Investment and bank statements prove that the borrower has sufficient funds for a downpayment, closing costs, and cash reserves. The majority of loans need a minimum of 20% of the overall purchase price. Some downpayment pre-approval depends on DTI, credit score, and loan type.
- Good credit – The majority of lenders ask for a 620+ credit score for conventional loan approval. Buyers with more than 760 credit scores enjoy a low rate of interest. Federal Housing Administration [FHA] approves a 580+ credit score with a 3.5% downpayment. The lower the credit scores the higher the downpayment.
- Employment verification – Besides, the borrower’s payslip, the lenders need to ensure employment stability. Therefore, they will call their employer for employment and salary verification. If the borrower has changed jobs recently, the lender may contact their previous employer. Self-employed borrowers will have to give two current year’s tax returns, as well as a business location and financial stability details.
- Other documents – Borrowers will need to give their driver’s license, social security number, and approval for the lender to gain access to their credit report.
The process is more detailed, so takes at least one week to complete but it quickens your house buying process. When you find an ideal home and show the pre-approval to the seller it can fast track the process, especially when the seller has multiple bids.
A pre-approval is valid for 90 days only, so get approved if you have a prequalification, realtor, and are already shopping for homes. It shows in your credit report, so only apply for preapproval when you start making offers.
Prequalification and preapproval are potent tools of the mortgage application process, which transforms you from a home shopper into a homeowner!