Close your eyes. Take a deep breath in. Now, exhale. Visualize you are standing inside of a house. Look around. What do you see? Hardwood floors? Tin ceilings? A spiral staircase? In my recurring daydreams, I often imagine my favorite elements in homes and piecemeal assemble the perfect house in my mind. Visions of curved archways, crystal doorknobs, and french windows drift through my mindscape. Though we all may daydream about the perfect house from time to time, those idle fantasies do not often include the nitty-gritty details of the essential processes every home buyer must undergo.
A first-time buyer may assume the initial step to obtaining a home is attending open houses or endlessly scrolling through online listings. However, your first stop should actually be to a lenders office. If you are serious about purchasing a home and want sellers to know it, then it is crucial to begin your search by obtaining a pre-approval for a mortgage from a reliable lender.
What is Pre-Approval for a Mortgage?
Simply stated, a pre-approval for a mortgage means that lenders have assessed your financial situation and have provided a rough estimate as to your price range. This is based on the amount of money the lender is willing to allow, and is a vital step, ensuring that you have an idea of what can ultimately be afforded. This is usually done by meeting with a lender and providing proof of financial documents and assets.
Basically, the lender is evaluating your income, assets, and credit reliability, and from there determines the potential price range. Once you receive pre-approval, it is important to take into consideration the realities of your financial situation and stay within a price range you feel sustainable, instead of immediately searching only within your highest approval range.
What Do You Need for Pre-Approval?
It is necessary to provide the following documents to your lender, as well as any others they may request in order to begin the process. You will need:
– W2 statements from at least two years prior
– current pay stubs or proof of income
– credit reports (the majority of lenders require a 620 to approve an FHA loan)
– two most recent tax returns
– bank statements
Can Anything Go Wrong?
It is important to understand that a pre-approval for a mortgage is not always a steadfast guarantee that the lender will provide the loan for the buyer. It is incredibly rare for a lender to pull out after a pre-approval, and even more infrequent to rescind after a closing. However, it is possible if you are in some form of default.
That being said, if you are not in default, and a lender withdraws after pre-approval, then it is a violation of contract. It is important to be upfront about all financial situations and potential concerns, as well as to choose a trustworthy lender to avoid any such issues.
How Long Does It Take?
A specific timeline for pre-approval varies based on many factors, including the complexity of your financial situation and credit history. The process can take anywhere from a few days to a few months, so it’s best to have realistic expectations for a time frame, and to get started as soon as possible.
What Comes Next?
It can be overwhelming when you take the first step to buy a house. You will need to acquire all the documents and seeking out the right lender for your mortgage pre-approval. If you have completed this step and are ready to move onto the next, then congratulations! Take a moment to celebrate this small victory. Now, it is time to look to the future and continue on your house hunt. After receiving pre-approval for your mortgage, you can begin to seek out and apply for the best mortgage rates available to you within the area that you are buying.
Though purchasing a home, especially for the first time, can seem like a long, tedious process, it is ultimately worth the effort to call a space your own and begin to manifest your dream home into a reality. It is helpful to fully understand the processes before you get started and to take it one day at a time to avoid any errors or overwhelm. Remember, even if it feels like the process is taking forever, there is a light at the end of the tunnel, illuminating your soon to be purchased home and the bright future that awaits within.
Brenna Lee is a Detroit based writer, artist and birth doula. She received her MFA from Naropa University where she was the recipient of the Leslie Scalapino Award for Postmodern Poetics. She is a former Editor of Gesture: Press & Journal.