While both first time and seasoned home buyers may face various challenges when purchasing a home, one way to minimize these challenges is by obtaining a pre-approved mortgage. Pre-approvals make the overall home buying process more convenient, and they eliminate the guessing games that often come when potential home buyers are trying to determine just what they can afford once they find their dream home.
Since pre-approvals include a specific approval amount, home buyers are much more confident when it comes to making the final purchasing decision, and it also shows real estate agents and private sellers that the potential home buyers are financially capable. When applying for a pre-approved mortgage, it is always a good idea to have your financial records ready and available so they can be easily accessed during the application process.
1) The first step in the process is to gather these documents and make sure that you have everything that the lender requires in order to offer pre-approval. Typically, most online lenders will provide a document list on their website, but generally you will need copies of your last two year’s tax returns, pay stubs, bank statements, and employment W2s or 1099s from the past two years. Additionally, if you have retirement savings and any investment accounts, it is always a good idea to have copies of these statements handy as well. You may also need documentation of any other additional income, you receive, including alimony or rental payments, so it is always a good idea to determine beforehand what your specific lender will require. Initially, you most likely won’t need a lengthy list of documents due to the fact that you are applying online, but you will need to have quick access to this information once the loan process moves forward.
2) Research and then create a list of online lenders that have positive reputations and a considerably long lending history. The reason you want to choose a lender with a long lending history is due to the fact that every day there are new online lenders popping up and you want to make sure your lender is legitimate. You can start the search by looking into lenders that you have already heard of, and any lenders you are unsure of, you can check their status through the BBB, Smart Hippo, and Consumer Affairs.
3) Once you have conducted your research and created your list of lenders, the next step is to compare your list of legitimate lenders based on their mortgage rates. This can be done by simply visiting the websites of your top picks, and they will usually have a link or section that states their current rates. While these rates are subject to change, this is definitely a good place to start, as you will get an idea of the rates you will ultimately be offered. Additionally, you will be able to narrow down your pre-approval application process by sticking with the lenders that offer the lowest interest rates.
4) The forth step in the process is to create a list of your assets and debts. You can easily do this with an Excel spreadsheet on your home computer, allowing for easy access. Depending on the specific lender, you may be required to fill in your complete asset and debt calculations when filling out an online application. Your lender may also request copied of statements, financial contracts and deeds in order to verify your online application, which is why it is always a good idea to have all documentation handy before you are pre-approved.
5) Next, you will want to make sure the online lender offers a secure online application. You will be able to determine whether the application is secure by checking in either the top or bottom the corner of your browser window. A secure site will have a key or padlock icon, and this is extremely important. If the icon appears to have a broken key or padlock, this will mean that the site is not currently secure, and if there is no icon at all, you will want to definitely move on to another online lender. This is a telltale sign on whether or not the lender you are applying with will protect your financial and personal information.
6) You will need to enter financial information for yourself, as well as your spouse or partner, which will include both incomes, employment information, and debt information. You will also need to enter your Social Security numbers and contact information. Once again, this is where having all of your financial documentation readily available will definitely come in handy.
7) Once you have filled out the application, you will be asked if it is okay to pull your credit information. This question will usually appear at the end of the application, and you will need to agree or disagree. It is important to agree to this, as it will allow the lender to access your credit information, and if you do not agree to this, there is a chance that the application process will end right there and your application will be cancelled.
8) Once you have entered your financial information and agreed to a credit check, you will be prompted to send copies of all required documents to the lender either by fax or regular mail. Depending on the lender, you may also be able to scan your documents and email them directly to your loan officer. In most cases, you will not be required to meet the lender face to face during the pre-approval process.
9) The final step in the pre-approval process is to wait for a response from the mortgage lender. Your answer may come via telephone, mail, or email, usually within a few weeks of submitting your application. There are also certain lenders that will provide an answer within the first 24 hours after receiving your application.
While the mortgage process can be quite detailed, you can definitely make it easier on yourself by becoming pre-approved. Pre-approval allows for more flexibility in your home search, and gives you additional peace of mind and confidence in knowing that you are already pre-approved for a specific amount, making the entire home buying process a lot more convenient.