Navigating the Mortgage Pre-Approval Process

by Garrett W Burdick 10/28/2019

Image by Precondo CA from Unsplash

Buying your first home can be stressful enough without worrying about whether or not your mortgage loan pre-approval is going to go through. You may not be prepared for the mountains of paperwork that you'll need to submit before a lender gives you the thumbs' up. That's why it's such a good idea to know the requirements before you narrow down your home search.

Here are the top items your mortgage broker or lender will need in order to pre-approve you for a loan.

1. Proof of Income

W2 employees will need paystubs, IRS 1040 forms, and copies of their W2 form for the last two years.

For self-employed individuals, and small business owners, the burden of proof is higher. In additon to 1099 MISC forms, you may need to submit a letter from your accountant stating that your business is still active and a profit and loss sheet. 

2. Asset Information

In addition to the regular taxable income you are bringing in, the lender will want to see proof of other assets, including savings, investment accounts, and written documentation of a family member's intent to gift you money.

These assets will let the lender know if you can afford a down payment, pay for the closing costs on the loan, and have enough cash reserves to afford the transition into homeownership.

3. Employment Verification

Lenders want to know not just that you are employed but also that you are stably employed. Thus, they request a letter from your employer to verify your employment status and the salary you're earning.

Self-employed individuals will need to submit at least two years of their complete 1040 forms in lieu of this verification process. 

4. Credit Information

Before they will pre-approve a loan, the lender makes a hard inquiry into your credit. You will need a credit score of at least 620 to qualify for a conventional mortgage loan or a Federal Housing Administration Loan with zero percent down. The government may approve borrowers for an FHA loan with a score between 580 and 620 if they are able to make a sizable down payment.

In order to qualify for the lowest interest rates available — typically the ones you see advertised — you must have a credit score of at least 760. In some cases, it is worthwhile to defer applying for pre-approval until you can raise your credit score. Why? A lower interest rate can save you tens of thousands of dollars over the life of the mortgage.

5. Personal Information

Finally, the lender will want to verify your identity by requesting copies of your driver's license, social security number, and signature.

About the Author
Author

Garrett W Burdick

Garrett Burdick is a Real Estate Professional and has demonstrated repeated success as an entrepreneur whose innovation, proficiency, and out-of-the-box thinking have all earned him the reputation as a seasoned strategist across multiple industries. Over the course of a decade, he has cultivated extensive knowledge in real estate. Garrett, a licensed Real Estate Agent has joined a prominent brokerage Vanguard Properties in Marin County to offer real estate services for sellers and buyers. With several years as a Real Estate Professional he is equipped with local marketplace familiarity and renovation expertise. Ultimately, Garrett is on a mission to offer a top-tier, seamless, and stress-free transaction to each and every client, and serve as their trusted ally during one of the largest investments they will ever make in their lifetime.

Outside of his career, Garrett is an avid professional photographer who owns Birdman Inc Locations Services and Buzz Photo Booths. He even has a culinary background as a Culinary Institute of America graduate. Above all, he cherishes spending quality time with his loved ones in San Rafael. He is happily married to his wife Tanya, and they are the proud parents of two amazing San Rafael High School boys, Walker and Cooper. Whether you’re seeking a new home or are a homeowner interested in selling your property, Garrett is here to help you turn your goal into a reality. Feel free to reach out to him at any time with your inquiries and he will be more than happy to answer your questions.