A preapproval letter tells home sellers that you have the ability to qualify for a certain mortgage amount, as judged by your lender. The process helps the lender determine the size of mortgage that you qualify for and helps you decide the price ranges to spend your time looking at. Unlike a prequalification, the preapproval process is very thorough, with the lender doing most of the review work required for a full approval, with the exception of the appraisal and title search (which can’t be completed until you’ve identified a home to buy).
Preapproval helps you to:
❑ Know how much you can borrow.
❑ Confirm your ability to qualify for a mortgage based on your credit, financial, and employment information.
❑ Strengthen your position to make an offer on a house. (A seller will
be more willing to accept an offer if the buyer is preapproved.) To become preapproved, you’ll need to work with a mortgage lender who will review your credit history, earnings information, employment history and assets. You can get this done in person, or via telephone and/or fax and the Internet. Here are the basic items that the lender will want to see:
❑ A loan application
❑ Verification of your employment (pay stubs, W-2s, and/or tax returns if you are self-employed)
❑ Information concerning any other sources of income (such as alimony)
❑ Source of cash for your down payment and closing costs
❑ Authorization to have your credit checked
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