Applying for a Loan

When you are making an offer, it is important to let the seller know that you are a “safe bet”. That confidence comes when a buyer has been “pre-approved” for a mortgage.

You may be wondering what the difference is between a “pre-qualification” or a “pre-approval”. A pre-qualification is merely an informal estimate of your income, assets and present debt to estimate the approximate price range you should be looking in for your new home. But a pre-approval means the lender is prepared to offer you a loan of up to a certain amount based on your credit, employment, and income and has determined what loan program is the best fit for you.

Here are some of the items that you should do to get prepared to apply:

  • Do a credit check before applying – This will give you an opportunity to clean any errors up before meeting with a lender. Even if your credit is good, mistakes are made all the time by retailers and institutions who make errors on names or social security numbers. These are errors you can clean up on your own before applying.
  • Provide the paperwork – The lender will need a number of documents from you including:
    • Asset and investment statements
    • Bank account statements
    • Credit card statements
    • Auto loan statements
    • Pay stubs for the last two months
    • Verification of other income sources
    • Tax returns and W-2s for the past two years
    • Form of ID
    • And, of course, the mortgage application!

The lender may ask for additional documents, but this will get you started.

Also, it is important to remember to not make any large purchases or move money without speaking with your lender – Don’t make the mistake of throwing your approval away with the purchase of a couch or outdoor furniture. Those can come after the transaction is complete.