There is nothing like having your “own” home. Most of us struggle for half of our lives to save enough money to build or buy a house. Some of us also opt for a mortgage to have our own house as early as possible.
A mortgage is the easiest way to purchase a house at a very young age. However, there would still be some struggles. To make the process hassle-free, experts suggest having a pre-approval letter before searching for a house. An approval letter does not guarantee that you will be picked up. However, it does improve the chances to find the best deal.
So, if you are struggling to find the best deal as well. How about stepping in pre-approved for a mortgage. Getting a pre-approval is not hard, the lender looks into a few things and gets you pre-approved. Here are the 4 things that you must have to get pre-approved;
- Pre-qualification
- Proof of income
- Proof of assets
- Some other relevant documents
Pre-qualification
To get a pre-approval mortgage eventually, one must be prequalified. Prequalification means an estimate of how much a person is capable of borrowing from a financial institution. It can be obtained from a lender only. The lender checks necessary documents and verifies assets to determine how much loan can be given. Prequalification is also necessary to know what a person has to do to get pre-approval.
Proof of income
A mortgage, in simplest words, is a long-term loan. In this legal agreement, the lender takes the borrower’s property with a condition that the conveyance of title will become void when the loan is returned.
Pre-approval is the first step you take to get a mortgage. Therefore, all important documents and proofs would be taken to issue a pre-approval letter. To have an idea whether the borrower is capable of repaying the loan or not, the lender usually demands proof of income. Generally, for a pre-approval letter, a wage statement for the past two years is supposed to be given. So, the borrower must have a two-year proof of income to be qualified for pre-approval.
Proof of assets
Proof of assets is investigated more keenly than any other necessary proof or documentation. The proof of assets gives the lender an idea of whether the borrower has enough funds for a down payment, closing costs, and cash reserves. If upon investigating, the lender finds out the borrower does not have insufficient funds for the purpose he would take no interest in issuing the pre-approval letter. Even though the pre-approval letter is not a guarantee that the loan would be given.
Some other relevant documents
As hinted above, several proofs and documents would be taken to issue a pre-approval letter. Employment verification, driver’s license, social security number, credit score, and tax return would also be required for the purpose.
In brief, to improve the chances of being chosen by a seller a pre-approval letter for a mortgage is necessary. To get pre-approval, the borrower must have pre-qualification, proof of income, proof of asset, and some other important documents.
