If you’re in the market for a house you’ve probably heard the term “pre-approval” being thrown around. You may have also heard the term pre-qualification, which is one step below being pre-approved for a home.
A pre-approval is written consent from a lender that you are financially able to purchase a home. Obtaining a pre-approval will expedite your home buying process and will allow you to compare terms between lenders. It’s recommended that you shop around with three or four different lenders and receive pre-approvals from all of them.
If you’re worried about tarnishing your credit score, just make sure you get pre-approved with the various lenders within a week or two of each other and the credit bureaus won’t penalize you. They will recognize the fact that you’re shopping around for the best loan and will allow it.
When you decide you want pre-approval to buy a house, you’ll need to make an appointment with your lender. During this appointment, your lender will verify all of the information required for you to obtain a loan. You will need to be prepared with several documents, including:
- Your most recent tax return
- Your most recent bank statements
- Your driver’s license
- A check for the application fee
- Your most recent pay-stub
- Your credit report
When you’re done with your pre-approval, you’ll end up with a Good Faith Estimate (GFE). A Good Faith Estimate is basically just a document that details the terms of the loan for which you’re pre-approved. This document will likely include your loan type, closing costs and interest rate.
