When you’re ready to find a home, the last thing you want to do is limit your possibilities. This is where you’ll be coming home to everyday for at least the next few years, right?
But you’d be totally bummed if you found the perfect place, only to lose out on the home of your dreams because you couldn’t submit an offer due to not having a prequalification.
If you don’t get a loan prequalification before you start looking, you might actually prevent yourself from finding—and buying—your dream home.
An Offer Must Be Submitted Along With A Prequalification in Order to Be a Valid Offer
No matter how high your credit score, no matter how much money you’re making, a home seller will not even consider your offer if there is no documentation from a reputable Mortgage Company stating that they have qualified you as someone they will loan the money to in order to buy a home.
What documents will you need for a mortgage preapproval?
Sometimes finding and buying the house is the fast part. Gathering the necessary documents can take a little while.
Houses are selling so fast right now in Arizona that if you find the house of your dreams but haven’t been pre-qualified, it’s very likely someone else (who has been pre-qualified) will buy the house right out from under you. Be ahead of the game by gathering these documents before you speak to a lender:
- Personal information such as your driver’s license, Social Security number, marital status, contact information and address
- Recent statements from your bank accounts and any investment accounts (exactly how far back you’ll have to go depends on the lender)
- Employment information, including where you have worked and for how long, as well as recent paycheck stubs and W-2 income tax forms for the last two years
- Your total monthly expenses, which includes bills you pay regularly
- Your overall financial condition, which includes all of your assets (stocks, 401(k), IRAs, bonds, cash) and all of your liabilities (any debts such as credit card debt, student loans, car loans)
- Profit and loss statements if you are self-employed
- Canceled checks for rent, which shows your payment history
- Gift letters, if you are using a gift from a relative to help cover the down payment
It’s helpful to create a folder in Google Drive or Dropbox where you can upload and update all documents in one place. If you wind up ultimately switching lenders you’ll be able to share documents with just a few clicks.
Now can we shop?
OK, so you’ve received that precious piece of paper. You’re in the game, practically packed and moving to your next address. A couple of quick reminders:
A prequalification is not a guarantee. Lenders want to have some wiggle room in case your financial situation changes between the time you obtain the document and when you actually find a home and complete the loan approval process. That means it’s important to:
- Keep your finances operating smoothly in the meantime.
- Avoid opening any new credit accounts — for furniture or anything else you’ll be planning for your new address.
- Keep existing lines of credit paid up and without substantial balance increases.
In this market, a loan prequalification might not be a home run, but it will certainly get you on base.
What’s even easier? You can begin a pre-qualification application just by clicking this link.