The first step in home buying has little to do with scouting potential homes to purchase and everything to do with making sure you are eligible for a home loan. Meeting with a lender to acquire a pre-approval and/or loan commitment prior to your home search will give you the confidence of knowing how much house you can afford. It will also give you a leg up when the time comes to make an offer, as well as expedite the loan process.
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Today’s buyers are competing hard for homes, price-wise and time-wise. Though you cannot control how fast an appraisal is performed or how soon a title search is completed by a title company, you can take steps to make sure your loan gets approved as fast as possible.
To give yourself an upper hand in a quick-purchase situation, follow these guidelines:
Have the correct documents prepared.
It’s no secret that mortgage approval requires a lot of paperwork. The most commonly-required verification documents include W-2 statements and federal tax returns from the last two years, your two most recent pay stubs and your two last bank statements. Your lender will also require copies of drivers’ licenses and social security numbers for all that will be listed on the mortgage.
Unique credit situations, such as: foreclosure or non-traditional credit, and other monthly debts, i.e. alimony or child support payments, will also require documentation. If you are receiving a gifted down payment from a relative, your lender will ask for verification documents as well.
Have the commonly required documents ready the first time you meet with your loan officer and make sure you provide any other documentation they request in a timely manner.
Get a loan commitment before shopping.
A pre-approval is a statement that shows your qualification to a home purchase subject to verification of certain items, such as income and assets. Though still a beneficial tool in the loan process, loan commitment takes pre-approval a step further.
A lender can verify all of your financial information even before you have a property in mind, and the only condition you will be subject to is the appraisal of the property.
Be upfront with your lender.
If you think there is something that will inhibit your approval, let your lender know. A large part of the mortgage approval process involves fact verification. It’s better for the lender to have an awareness of any issues from the beginning so that they may offer a solution.
For more information about home buying and financing, in general, download our free Mortgage 101 Handbook, a great reference for first-time homebuyers.