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You don’t necessarily have to apply for mortgage preapproval to buy a home — but it’s widely considered to be a good idea.
By applying for preapproval with multiple lenders, you can compare and contrast terms to find the best deal. A preapproval letter also shows the seller you’re serious about buying a home, which can give you a leg up in the buying process.
What is a mortgage preapproval?
Mortgage preapproval is an early step in the homebuying process. You’ll apply for preapproval when you’re shopping for homes and expect to buy within two or three months. When a lender preapproves you for a mortgage, it’s saying it would like to work with you.
In a preapproval, the lender tells you which types of loans you may be eligible to take out, how much you may be approved to borrow, and what your rate could be. Once you’ve been preapproved, your rate is typically locked in for 60 or 90 days.
You’ll need to have certain documentation on hand when you either speak with a lender face-to-face or apply online.
9 things you need to be preapproved for a mortgage
Have an official form of identification on hand, like a driver’s license or passport.
You’ll also need to provide your Social Security number. Simply telling the lender your number isn’t enough. You should either show your Social Security card or a document that includes your number in full, like a tax form.
2. Proof of residence
Bring an official document that shows your present address. This can’t just be an envelope addressed to you from a friend or family member. It needs to be a legal document, such as a utility bill or bank statement.
3. Employment information
Bring pay stubs from your current job. The lender might call your boss to verify employment and salary, so have contact information on hand.
If you’re self-employed, then you have to show more employment documentation. Bring profit and loss statements, tax returns, and 1099s for the last two years.
4. Proof of income
Along with your current employment and income level, a lender wants to look at information from the past couple years. Gather W-2 forms and tax returns from the past two years.
Don’t forget documentation for any income other than your salary. This could include an annual bonus or income from a real estate property you rent to tenants, for example.
5. Proof of assets
You’ll need documentation for all your investment accounts, including an IRA, brokerage account, or employer-sponsored retirement account like a 401(k).
You should also bring bank statements from all your bank accounts including savings, checking, CDs, or money market accounts.
6. Debt documentation
Provide official documentation of all your debts. This could be student loans, car loans, personal loans, or credit card …read more
Source:: Business Insider