When you’re in the market for a house, whether you’re a first time buyer or an experienced homeowner, you know that your housing budget makes all the difference. Before you can make an offer on a house, you need to know if you can qualify for a home loan, and if you need to, how much. Often, a prequalification letter is presented at minimum, but this letter is a nonbinding offer by the lender to provide you a loan for a certain amount of money. A prequalification essentially states that if your information can be verified and your credit rating is solid, then you may be provided with the amount requested; however, none of your financial information is verified.
A preapproval, on the other hand, involves the lender actually verifying the financial information you provide: income, assets, debts, credit history, etc. After the verification process, a letter is issued that states you are approved for a certain amount of mortgage and is good for a certain period of time.
So why ask your lender for a preapproval letter?
- Your mortgage company has done a thorough review of your financial information and has provided you with a letter stating they will loan you a certain amount of mortgage, thus, it is obligating itself to provide you with this loan. A potential buyer who already has a preapproval letter from a lender stands a much better chance of having their purchase offer accepted than someone who is making their offer contingent upon obtaining financing.
- The preapproval letter provides you with confirmation of how much you are able to take out to help purchase your new home.
To obtain a prequalification letter, preapproval letter, and eventually a mortgage, you will need to gather the following information and documents:
- EMPLOYMENT AND INCOME: Be prepared to answer questions regarding your current employment, such as who is your current employer and how long have you worked there? Be able to provide recent pay stubs and W-2s.
- LIABILITIES: Do you have current debts? How much of your income is required monthly to pay these debts?
- ASSETS: What is your current bank balance? Do you have any other assets or sources of income?
- CREDIT: Your credit report is likely to be pulled for verification of your credit history.
Do you have more questions about preapprovals or the mortgage process? Contact Kama’aina Mortgage Group for all of your mortgage needs – we’re here for you!