Importance of Getting Pre-Approved

House hunting can be full of surprises—like stumbling upon your dream kitchen or a cozy back porch. However, one surprise you don’t want is finding out you can’t qualify for a mortgage after falling in love with a home. That’s where the importance of getting pre-approved comes in.

Getting pre-approved is crucial early in your home buying process. It provides you with a clear understanding of how much of a loan you qualify for, making your home search more efficient. Additionally, sellers see you as a serious buyer with pre-approval, which can strengthen your position in competitive markets where multiple offers are common. Pre-approval can also expedite your loan closing process, which sellers appreciate.

Once pre-approved, you’ll receive a formal letter detailing the loan amount and terms you’re eligible for. This letter serves as proof of your financial capability to both real estate agents and sellers, helping you make strong offers aligned with your budget.

Remember, a pre-approval doesn’t lock you into a specific lender, but it does offer you insights into potential mortgage payments and enhances your buying power. If you’re serious about buying a home, getting pre-approved early can make a significant difference in your home buying journey, ensuring you’re prepared to act swiftly when you find the right property.

How the Process Works

Be prepared for mortgage lenders to assess the following factors before they preapprove you:

Employment history
Income
Credit history
Assets
Outstanding debts and liabilities
Debt-to-income ratio (DTI), which is an essential loan factor that compares your gross monthly income against your monthly debt payments

Next, you can expect lenders to ask for documentation to verify the preceding factors. It helps to be organized.

Gather these documents ahead of time:

Proof of income, such as pay stubs and W-2 statements
Additional income documentation if you’re self-employed (Full list of documentation needed for self-employed homebuyers here)
Bank statements
Asset account statements to show investment income, retirement savings, etc.
Tax returns
Driver’s license and Social Security number
Debt information, including car loan documentation
Gift letter, if applicable

Once you’ve submitted your documentation, the process usually moves swiftly. Your lender will either (1) pre-approve you, (2) pre-approve you with conditions, or (3) deny your application. Getting pre-approved is a positive step! If you already have your pre-approval and find the home you want, your lender will update it with the property address and proceed to arrange for an appraisal.

Being pre-approved with conditions is still encouraging. It means there are minor tasks left, such as providing missing documents or answering additional questions, to achieve full pre-approval. If you’re denied, your lender will explain the reasons clearly. You may need to work on improving your credit score or addressing income or banking issues before reapplying.

Throughout this journey, remember that AmeriSave is committed to supporting you. From Certified Approvals to other streamlined processes, we aim to make obtaining a mortgage as smooth as possible. Our dedicated mortgage bankers are here to collaborate with you so that you can soon enjoy that cozy back porch.