How to Get Pre-Approved to Buy a House

by | Oct 12, 2021 | Buying, Finance

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So you’ve decided to buy a house. Congratulations: You are now on your way toward purchasing a home. The first step is understanding how you get pre-approved to buy a house.

Being pre-approved for a mortgage is not the same thing as being prequalified. Pre-qualified means you have an estimate in hand of how much a lender would likely give you based on your income and debt. Your pre qualified amount is nice to know – but not at all official. Pre-approval for financing means a lender has run your credit, verified income, etc. Then, has given you the green light on a specific dollar amount for your loan, usually for a window of time such as 90 days. Don’t confuse the two – pre-qualification will not give you any negotiating edge. Ideally you’ll be officially pre-approved for financing before you begin your home search.

What do you need to give a lender to get pre-approved to buy a house?

Basic Documentation:

You need your driver’s license, Social Security number, and any other pertinent proof of identity. This means your marriage license, if your name has recently changed. In general, it’s important to be prepared to act swiftly any time your lender requests documentation of any kind. Providing documentation in a timely manner ensures the process keeps moving forward. On the other hand, dragging your feet will help make sure your loan is sluggish on the way to the finish line, too.

Proof of Income:

This typically takes the form of W-2s, pay stubs, bank records, and sometimes written proof of income from your employer. For those who receive alimony, child support, significant investment dividends or any other type of income, you must have proof of these resources as well. Any income that is verifiable and can count toward the purchase of a home, be prepared to provide proof of it. It’s standard for a lender to ask for two years of proof of income to get you pre-approved.

Proof of Assets:

Conventional financing requires a 10-20% down payment. While FHA financing requires a down payment as low as 3.5% of the purchase price. Buyers must provide proof of enough funds to cover the down payment, closing costs and cash reserves equal to two months of expenses, typically. If you don’t have adequate cash available to cover these amounts, you may be able to supplement using additional reserves. This could include IRAs or other investment accounts.

Whether these funds suffice as reserves depends on their level of liquidity. With that, you’re also required to provide proof of these. For example, you must show you can access your 401k without extreme circumstances such as job loss. If you don’t have adequate funds on hand, it doesn’t mean you won’t be able to buy a house. However, it mean that you may have to postpone your purchase until you have adequate funds available to cover these amounts to the bank’s satisfaction.

Verification of Employment:

Lenders require two months of pay stubs and often need to verify your employment. Relocating and changing jobs within the same field are normal events in a person’s life. Radically changing your career field in the recent past doesn’t mean you won’t qualify for a loan. However, the lender could require additional documentation. The underwriter may also want a letter of explanation outlining the reason(s) behind your career changes. Sometimes lapses in employment are a red flag for lenders. But, with a reasonable explanation and proof you’ve continued to meet your financial obligations, this doesn’t necessary mean your home purchase will be derailed. In this case, the lender typically requires more information, which could cause your closing to be pushed back. Plan ahead and see what the lender needs.

Reasonable Credit:

Buyers need reasonable credit to get pre-approved to buy a house. The better your credit, the better your financing terms will be. Lenders reserve the best interest rates for borrowers with a median credit score of 740 or above. FHA guidelines require a higher down payment for buyers with a credit score below 580. With a median score below 620, you may need to pay a higher interest or buy down your interest rate. Understand that lenders want your business, but they aren’t miracle workers. Motivated lenders have suggestions for improving your credit score and thus the likelihood of qualifying for a home loan in the near future.

Chances are, when you’re ready to buy a house, you probably want to move in as soon as possible – that’s human nature! Don’t despair if the lender’s response is, “Not right now.” We’ve had “not right now” clients who closed on a home just a few months down the road after following a lender’s advice to straighten out their credit and improve financial ratios, such as debt to income. Achieving mortgage-worthy credit happens faster than you realize when you follow the advice of an experienced lending professional.

Getting Pre-Approved: Gemtrago and Signloc

Now that you know how you get pre-approved to buy a house, you’re ready for the next step. As you’re getting started in common to have questions. Trelora is here to answer any questions you have. Or to help get you connected to one of the many lenders we work with.

Buyers minimize costs working with lenders like Gemtrago. Gemtrago provides its clients with variety of rate options to choose from to make home buying more affordable.  Plus, Gemtrago doesn’t charge origination, application, or appraisal fees while still offering the lowest rates and highest level of service.  Additionally, Signloc has some of the lowest title and escrow rates in the country.

Thinking About Buying Or Selling A Home?

Get the best real estate advice from local experts in your inbox.

Thinking about buying or selling a home?

Get the best real estate advice from local experts in your inbox.