THE IMPORTANCE OF STAYING UP-TO-DATE ON YOUR PRE-APPROVAL STATUS
Before you shop for a home, you should know how much you can afford. If you’re in the initial stages of thinking about buying a home – or even just curious - you should at least get approved so you have a good idea of what you can afford and/or what you must change/fix before you buy a home.
What Does it Mean to be Pre-Approved?
A pre-approval means a lender (Valley Mortgage, in this case) approves how much loan you actually qualify for. Most banks and mortgage brokers only provide a “pre-qualification” letter. That’s an estimate based on very basic information. It’s not binding in any way and selling real estate agents know this. That’s why the pre-approval is the gold standard when making an offer on a listing.
We recommend getting pre-approved 6 to 12 months before you’re thinking of buying a home, so if the “right home” comes on the market, you can act quickly and the seller will feel more comfortable with your offer than simply pre-qualified lookers.
How Does it Work?
A pre-approval is a written document from a lender stating how much loan you can afford. It’s not an estimate with conditions, it’s solid.
The process differs by lender, but in general, here’s what you need:
- Your recent paystubs (covering the last 30 days)
- Your employment history for the last 2 years
- Your recent (2 years) personal and business tax returns (if applicable) & W-2’s
- Your bank statements for the last 30 days (all pages) for all deposit accounts (checking and savings)
- Your current statements for investments accounts (all pages) (401K’s, retirement, stocks, bonds, etc.)
- A copy of current driver’s license(s).
- Bankruptcy discharge, if applicable
- Divorce decree or child support orders
When does a Pre-Approval Expire?
Because your financial condition can change in the blink of an eye, a pre-approval letter is only good for the period stated in the document (varies by lender).
Lenders do this so you must update your information and get preapproved again, if necessary. Since your credit score, income, employment, and asset situation can change at any point, there may extenuating circumstances, but usually not.
Can a Pre-Approval Change?
If you update your information and your credit score fell, your income dropped, or you changed jobs, lenders may have to change how much you are approved for or the terms of the loan you’re approved for.
An underwriter will evaluate your ability to afford a loan, and if approved, will write a pre-approval letter. This is the letter sellers and real estate agents want – it shows them you are a qualified buyer and can afford the home if you place a bid on it.
Anything can affect your pre-approval, but in general, if any of the following occur, it can negatively affect your pre-approval:
- Your credit score drops
- Your income decreases
- You lose your job or change jobs into a different industry
- You don’t have as much money to put down on the home or cover the closing costs
- You take on new debts
Once you get pre-approved, it’s best to keep everything status quo or improve your qualifying factors to ensure you can secure the loan when you’re ready to buy a home.
We Believe Pre-Approval is the Strongest Document in the Buying Process
Realtors tell us all the time that the Valley Mortgage Pre-Approval document is a great way to make an offer, showing the seller that there is no problem with you getting financing. So, if you even have an inkling of a thought of looking at a new home, contact us or call us today to get pre-approved. 701-461-8450