The first step in buying a new home is gaining a realistic understanding of your budget, especially if you plan on taking out a mortgage for your purchase. You may have an idea of what you can afford, but you need to be sure before submitting an offer. This is where a mortgage preapproval comes in.
Working with a lender who will analyze your financial data, you will find out what size loan you can comfortably be approved for once you have identified the home you would like to buy. There is nothing more disappointing than having your heart set on a specific home, only to find out that you cannot afford it.
Having a preapproval will not only narrow down your real estate search, but will also put you in a good negotiating position. Sellers want to know that any offers have been vetted by a lender with a good reputation and that their buyers are well qualified. If you want to take it a step further, you can go through the entire underwriting process before even finding a home so that all the only thing outstanding is the property appraisal. This allows you to convince sellers that you are an exceptionally strong buyer for their property and provides the opportunity for a very fast close if desired. This can make you stand out from the competition. If you don't have a lender, please reach out to our Buyer Specialists for a recommendation.
So what do you need for a simple preapproval? Your lender will walk you through all you need but be ready to have the following in order and on hand.
- Pay stubs
- Tax returns
- Recent bank statements
- Employment verification
- Income sources
- Statements from any investment/retirement accounts
- Real estate documents on any properties owned
- Statements from car loans, credit cards, student loans, etc.
Your lender will let you know what additional documents are required, but getting a head start is always a good idea. They will also pull credit on your behalf and a great lender will be communicative throughout the process. If you have any questions on this or any other step in the home buying process, give us a call and one of our Buyer Specialists will walk you through all you need to know!