why getting pre-approved is vital when house shopping
First, the process of being pre-approved all starts with the lender which you choose to apply with. Being pre-approved means that the lender is confident that you have sufficient funds for down payment and estimated monthly mortgage payments. Before going to get pre-approved, make sure to check your credit score using sites such as Experian.com or freecreditreport.com so that you aren’t surprised if there are setbacks during the pre-approval process. Information you’ll need to get pre-approved includes:
Income Statements: You will need to be able to supply the lender with pay stubs, W-2’s and tax returns from the last few years. You’ll also need other documentation such as any income from a second job, bonuses, commissions, interest or dividend income, retirement benefits, etc.
Asset Information: Most lenders will want other income information such as your investments. Bring any bank statements that will show this, or 1099’s from your brokerage in which you are using to make investments.
The reason to get pre-approved prior to house shopping is that it will allow you to better know your budget. It will map out HOW MUCH you can take out for a loan, and it’ll break down how much a month your mortgage payment will look like. Once you know this information, it will be easier for the agent to be able to find homes that will be in your range and fit your needs as well.
The market is also saturated with buyers, versus, the amount of properties on the market. To stand out as a buyer, the pre-approval shows agents you are serious and will likely give you an edge as far as agents’ attention goes as well. They will want to find you exactly what you need right away. Realtors will ask you if you’ve been pre-approved to save time and always be sure you’re serious. If agents scheduled showings for anyone who called, they could be wasting serious time.
Discover.com offers a great mortgage pre-approval calculator to estimate how much you can afford, but also keep in mind that many of those sites are giving you average figures. Without all prior tax info, income statements, other debts, etc. you won’t know for sure how much you can afford until you see an actual lender.
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