How & Why You Should Get Pre-Approved for a Mortgage
With all of the stress associated with home buying in Charleston, SC, homeowners need to do everything they can to reduce their worries. One of the easiest steps that they can take is to get pre-approved. Individuals who are pre-qualified for a home loan are able to go into the home buying process with the knowledge of what they can handle financially. It also ensures that they do not discover that the perfect home is out of their price range after they find it.
What is Pre-Approval?
Pre-approval is a term used by lenders. Potential homeowners apply with a lender to figure out the size of the loan that they will qualify for. This amount is typically based off of the individual’s credit history and their income. Once the pre-approval letter is sent out, it is valid for 60 to 90 days.
Why do People Need Pre-Approval?
Homeowners in Charleston, South Carolina need pre-approval for numerous reasons. The main reason pre-approval is necessary is because it shows how much the homeowner can afford. Since a house can only be purchased with the amount of money or loans available, home buyers have to know how much money they have to work with. When it comes to making an offer, sellers prefer buyers to have documentation of pre-approval to show they can follow through with their offer. If they do not have a paper that shows that they are approved in advance, the seller will not think that the offer is a serious one. In addition, any home that is owned by a bank will also require a pre-approval letter before they will choose to accept any offers.
What Documents are Needed to get Pre-Approved?
To get pre-approval, home buyers have to first visit a lender. It normally takes one to two days to get approved after all of the paperwork is turned in. Lenders typically ask for W2 forms and tax returns from the last two years. They also ask for the last three months of pay stubs and banks statements. Any other statements that relate to assets like stocks or bonds for the last two months should be brought to the lender. Current renters should bring in contact information for their landlord while current homeowners should bring in their mortgage data. For any self-employed individuals, business tax returns must be brought in for the last two years in addition to a current profit and loss statement.
What if the Lender Chooses not to Pre-Approve Someone?
On occasion, lenders will choose not to pre-approve a home buyer. This can be dealt with and mitigated. The homeowner can correct any errors that are on their credit report. After the errors are fixed, it will improve their credit score. Home buyers can also lower their debt and improve their debt-to-income ratio. Another manner of improving pre-approval chances is by increasing the down payment amount. Although this may be difficult for some families, it could be worth the wait. In addition to ensuring that the homeowner is pre-approved, it also makes it so the homeowner will pay less in interest over the course of their loan.
Purchasing a home does not have to be difficult. As long as homeowners are pre-approved and stick within their budget, home buyers will be able to find the ideal property for their needs.