If you are serious about looking for a new home, your search should begin in a mortgage lender’s office. Most buyers use a mortgage to pay for the purchase of a home. A loan officer can help you get pre-qualified or pre-approved for a mortgage so that you can streamline the search for the perfect property.
Looking at houses with a pre-approval letter in your hands makes it easier to place competitive offers and be taken seriously by sellers. Understanding the pre-approval process will help you be better prepared to buy the home of your dreams.
1. Prove Your Income
The amount of money a mortgage company will lend you depends largely on your ability to make monthly payments toward the balance of the loan. A mortgage should never create financial hardship, so your lender will want to start the pre-approval process by looking at your income.
Be prepared to offer copies of your W-2 statements showing your taxable income. If you are self-employed, you will need to provide your tax returns and fill out the Fannie Mae (FNMA) Cash Flow Analysis form to help your lender determine your mortgage eligibility.
The pre-approval process cannot move forward until your income has been verified, so be prepared to provide your loan officer with the necessary documentation during your initial meeting.
2. Verify Assets
While a mortgage will cover the bulk of the money owed when purchasing a new home, you will still need to pay cash for some expenses yourself. These costs include the down payment required by your lender, closing costs, and cash reserves to cover inspections and other pertinent services.
You will be expected to provide your loan officer with documentation that verifies your assets during the pre-approval process. This documentation can be a copy of your checking and savings account statements, dividend checks from your investments, or a gift letter if you will be receiving money from a relative or friend to help cover costs while purchasing a home.
Make sure that you know the value of your assets and that you are prepared to verify your liquid assets as you begin the process of getting pre-approved for a mortgage loan.
3. Verify Employment
When trying to pre-approve borrowers for mortgage loans, it is common practice for loan officers to take the time to verify any employment information provided during the application process. Your financial documents and proof of income provide only a snapshot of your solvency, while employment verification can provide a loan officer with a broad overview of your financial history.
Contacting your current employer allows a loan officer to verify that you are still employed and that the income information you have provided is correct. If you have recently changed jobs, you may be asked to provide contact information for both your current employer and your former employer.
Individuals who are self-employed will need to provide extensive information regarding the nature of their business so that the loan officer can feel confident in the ongoing success of the company. Employment verification plays an important role in determining how stable a lender is, and it can be the difference between the issuance of a pre-approval letter and being denied a mortgage loan.
Getting pre-approved for a mortgage before you begin your real estate search will ensure that you are prepared to act quickly when you find the home of your dreams.
At HomeMortgage.com, we work hard to help potential buyers like you find the best loan officers in your community. Log on to the website to learn more about mortgages and to begin the process of getting pre-approved for your mortgage loan today.