A large percentage of people when purchasing a home usually do so by obtaining financing. In doing so, the most common first step is getting preapproved with a bank or lender. The preapproval process is fairly straightforward. First, you have to decide if you want to go to a bank – such as Bank of America or Wells Fargo — or a mortgage broker. Although there are a few minor differences between the two, there’s really one major one that I explain to my clients. That is that when you go to a bank such as Wells Fargo, they’re going to give you Wells Fargo rates. If you go with a Mortgage Broker, they can give you ANYONE’s rates…which in turn may be cheaper.
Once you’ve decided who you are going to go get preapproved with you should be prepared to bring four sets of documents. The first is your two most recent paystubs. The bank approving your loan is going to need this to see how much income you are making. The second thing needed is your two most recent tax returns…not only do they want to know how much you make currently, they want to see how long you’ve been making it. And don’t be afraid if you make more income now vs. in the past or vice versa.
Thirdly they’re going to want a list of ALL your assets and statements. This means they need to see you’re checking and saving account balances, your IRA, 401k, stocks, any additional properties you own, etc. Even if you don’t plan on pulling money from your IRA account as a down payment, they still want to see how much money you are worth. Finally, they are going to want to see your credit score. Now there’s two ways to go about this…you can either have THEM run your credit, or you can check it yourself in advance and bring them a full printout. Check out my “How Credit Scores Work” video for more detailed information about that subject.
Once you bring all this documentation to the bank or lender, they’re going to basically input all the information into a system and it will give you an estimate of what you are pre approved for! At this point the bank or lender should be able to explain to you what your payment options are and what your mortgage payment will include. Remember though that this is only a pre approval, and not a FULL approval. Once you’re in contract to buy the property you want they are still going to need more documents, updated records and likely a few short letters explaining a few things. Other than that, you’re all set to go find your property! Just take that piece of paper and submit it with the offer you’re placing. Since you’re pre approved, every seller will know that you’re not wasting their time because a bank has already ran your financials and vouched that you’re a solid buyer…now that’s good to know. 🙂
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