Get Pre-Qualified or Pre-Approved?
Many first-time home buyers wonder what the difference between the two is and where they should start.
The first step in your quest to owning your own home is to get pre-qualified. Pre-qualification is a simple calculation of your buying power. It’s based upon your income, debts and available assets. It is a very simple thing to do and helps immensely in setting the criteria for your home search.
Pre-approval is actually the process of submitting a loan application. If you are seeking to purchase a home within six months, obtaining a pre-approval is recommended for two reasons. First, you can discover and resolve any problems with your loan application early. And second, you are in a better bargaining position when bidding on a home because sellers know you already have your financing in place.
The Pre-Approval Process
The process of pre-approval is information intensive. Following are the items of information you will be required to provide:
- W-2s and 1040 forms for the past two years
- Pay stubs for the past month
- Residence addresses for the past two years
- Employment history for the past two years (including contact information of employer)
- Gross monthly salary for the past two years (including bonus income)
- Asset Statements for the past three months (i.e., checking, savings, stocks, etc.)
- Summary of current debts (including name, address, account numbers and monthly payments of all open loans)
- Addresses and loan information of any other real estate owned
Also, please note that there is a fee associated for pre-approval; you pay for the credit report and appraisal. Fees range from lender to lender, but it is typically around $400 and payment is due upon application.