Before you start hunting for a dream house there are a lot of things to understand. The first job on hand before you move on looking in neighborhoods or online is to possess ‘Your preapproval letter’.
Prequalified and preapproved is a confusing mortgage jargon. Serious buyers need to understand the difference between these two.
Prequalified means the lender has screened you initially. You will just have to provide basic information to get a rough approximation of how much you can afford. Frankly speaking, it will hardly help to seal a deal on a house.
Alternatively, preapproval moves the opening loan process step further. The lenders will ask additional information like credit report. Some people are also asked to submit bank statements, tax returns, and employment verification. A preapproval letter allows the home sellers and real estate agents know that you are serious about buying.
If the sellers are aware of this letter, while bidding they are impressed. The preapproval letter proves that you are capable to complete the sale, as you already have appropriate support.
Documents necessary for mortgage preapproval
- Personal information like social security number, driver’s license, contact information, residential address, and marital status.
- Latest bank and investment account statements.
- Employment information including your job details and experience along with current paycheck slips and last 2 years W-2 income-tax forms.
- Total monthly expenses including regular payment bills.
- Overall financial status including assets and liabilities.
- Gift letter, if the down payment is covered as gift by a relative.
- Self employed needs to provide profit & loss statements.
- Rental property income, if any.
- Canceled rent checks, which reveals your payment history
Mortgage preapprovals does not guarantee
Obviously, you get an edge over other interested buyers with mortgage preapproval letter but is not a sure thing. Preapproval process is not an assurance from the lenders to issue Laen kinnisvara tagatisel (Real estate loan) but is very close. On the preapproval there may be stipulations listed to receive a loan.
Even though preapproval letter proves a lender’s willingness to provide real estate loan but is not a legal assurance until you conclude the application process. Moreover, during closing process the lenders can trip things like including an evaluation of home value or your capability of making enough down payments.
What does a typical mortgage preapproval letter contain?
Preapproval letter is drafted on the basis of your income, credit history, assets, and liabilities with an assumption that your financial status is still the same. You will not consider it as a commitment for lending until the listed conditions are fulfilled.
- Valid sales agreement process gets initiated
- Satisfactory evaluation is done
- A mortgage program is selected within preapproved amount
- Commitment rate is issued by lenders as per referred mortgage program.
The letter will state an estimated purchase price you are eligible for and an expiration date, which is within 90 days after issue.
If you are struggling with credit report issues then clear it up, before you go in search of property.
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