Pre-Approved in Three Steps

While leisurely shopping for a home may be enjoyable, there is one thing stopping you from owning the home of your dreams – a pre-approval letter. Otherwise known as proof of financing.

Getting pre-approved these days is a lot easier than people think, you can complete a pre-approval application in the same time it takes to brew a pot of coffee!

Here are a few reasons why future homebuyers benefit with them:

  • You will learn the maximum amount of mortgage you can borrow and therefore have an idea of a comfortable price range.
  • Perfect opportunity to discuss loan options and budgeting with the lender.
  • The lender will check your credit and alert you to any problems.
  • Home sellers expect all buyers to have a pre-approval letter and are more willing to negotiate with people who have proof of financing.

Be careful when estimating your own comfort level with a housing payment rather than immediately aiming for the top of your pre-approval amount.

The value of a pre-approval is clear, here are 3 things needed to complete the process:

1. Proof of Income

  • 30 days of pay stubs that show income as well as your year-to-date income
  • Federal tax returns

2. Credit Score

During the pre-approval process the lender needs your confirmation before pulling your credit scores. But it can be upsetting to learn that your homeownership future partially hinges on this hard-to-understand number. I recommend downloading CreditKarma for an estimate of your score, you can request your full credit report once a year here.

AnnualCreditReportis authorized by FACTA, signed into law by George W. Bush in 2003, to be the government required option to obtain one free credit report from each of the bureaus every 12 months.

So what credit score is needed to buy a house?

The answer is, it varies.

The typical minimum credit scores by mortgage type:

  • FHA Loan-  580+ credit score
  • VA Loan- 620+ credit score (some lenders require 580)
  • USDA Loan- 620+ credit score
  • Conventional Loan- 620+ credit score
3. Documentation

The lender will need to copy your driver’s license, social security number, and your signature allowing them to pull a credit report.

Once the process is over you will receive the pre-approval letter  – you can find the amount you’re qualified to buy a house for on line 20.

The Bottom Line

Consulting with a lender before you start the home buying process can save a lot of headache later. Not only is it a simple process but it can be done anywhere.

What comes after you get your pre-approval letter? Find out here: 7 steps to buy a home.