What is a Mortgage Pre-Approval?
In today’s competitive real estate market, pre-approvals are more crucial than ever. A mortgage pre-approval states how much money you can borrow and how much house you can afford based upon the financial information given to your mortgage lender.
When Should I Get Pre-Approved for a Mortgage?
It is beneficial to get pre-approved for a mortgage before you begin your house search during the home buying process because a pre-approval outlines how much house you can afford. Therefore, the pre-approval will help you create a budget and give you confidence while you search for the right property. Having a mortgage pre-approval may prove you are a serious buyer and may be beneficial during a bidding war on a home.
Documents Needed for a Mortgage Pre-Approval
Typically, a mortgage lender will request the following documents for a mortgage pre-approval:
- Last two years of Federal Tax Returns (personal & business)
- Last two years W-2 statements
- Two most recent pay stubs
- Two most recent months bank/brokerage statements
- Copy of ID’s
How Long are Pre-Approvals Good For?
A mortgage pre-approval is usually good for 60-90 days. If you’re still searching for a property when the pre-approval expires, get in touch with your mortgage lender to get a new one. A mortgage pre-approval has a time frame because the lender bases it on your most recent financial information.
Difference Between Pre-Approval and Prequalification
A pre-approval is a written commitment from a mortgage lender that states how much you will qualify for, and how much house you can afford. A pre-approval may also indicate conditions that must be satisfied for the commitment to be binding.
A pre-qualification is a simple, non-binding letter drawn up by a mortgage specialist that states that they have reviewed your financial information. A pre-qualification only provides an estimated or approximate loan amount and is not a commitment.