You’ve been searching online for the right home, cruising through neighborhoods looking for the “that’s it!” house. You’ve got to have one thing in hand before the fun begins: your preapproval letter.
Prequalified or preapproved?
Mortgage terminology can be confusing at times. One important milestone to becoming a serious buyer is fully understanding the difference between being prequalified and preapproved.
Prequalifying means you’ve been initially screened by a lender. Usually, you will submit some basic information, and the lender will provide a rough estimate of what you might be able to afford. On the other hand, preapproval takes the preliminary loan process a step further. Additional financial information is gathered. In most instances, you will be asked to provide many of the same documents that will be required to complete the actual loan process, including tax returns, bank statements and employment verification. With a preapproval letter from your lender, real estate agents and sellers know you are a serious buyer.
This letter can be shown to sellers when bidding on a property. It proves that you already have backing and the ability to go through with the sale, which makes you a much more attractive buyer.
What documents will you need?
- Recent bank statements and any investment accounts. (To show where the down payment monies will be coming from.)
- Employment information, as well as recent paycheck stubs, W-2’s and tax returns for the last two years.
- In some cases other documents will be required but this is on a case by case basis.
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