It might be tempting to start your home search by scrolling through amazing houses on a real estate app, but the best place to start? The simple yet easily overlooked pre-approval1 process.
A lender will help you get pre-approved, meaning you’ll be qualified to borrow up to a certain amount of money for a home loan. Receiving a pre-approval letter means you’ve found a lender who is confident in your ability to make the necessary down payment, as well as stay on top of your monthly payments going forward.
Tip: Some lenders offer a pre-approval estimate option, which often has fewer requirements and takes less time than the typical pre-approval process. So, if that’s something you might be interested in, ask your lender if it’s an option.
Getting pre-approved is one of the best steps you can take to secure the home you want. Here’s why:
- It helps narrow the search range for you (or your realtor).
- You can shop in your price range, preventing you from falling in love with a home outside of your budget.
- Once you’re ready to make an offer on a home, it proves to your realtor (if you use one) and the seller and their listing agent that you’re a qualified and serious buyer. This is especially useful in a sellers’ market where the seller could have multiple offers on the table. The buyer with the pre-approval from a reputable lender will stand out in a positive way.
So, where do you start?
1. Check your credit
Before seeking pre-approval, check your credit score and credit report(s). Knowing where your credit stands before starting the process will give you a better idea of what you might qualify for. Your potential lender will be running a hard inquiry on your credit as well, so it helps to know what they will see. If you find your score is lower than you thought, or if you have errors on your credit report, take the time to get it cleared up so you can feel confident as you start shopping for a home.
2. Gather the information your lender needs
Document requirements may vary based on your lender, but generally, there are four things you’ll be asked to provide:
- Proof of income: Track down a few of your most recent pay stubs, W-2s and tax returns from the past two years (digital copies are fine), as well as documents that show other sources of income. This may include (but is not limited to) wages from a side job, bonuses, overtime pay, interest and dividend income, Social Security payments, alimony or child support, etc.
- Proof of assets: You may also need to provide documentation of other assets you have (besides your income), such as bank statements and investment account statements. This information proves you have the money needed for the down payment and closing costs, as well as cash reserves.
- Tip: If you are gifted money from a friend or family member, you should bring documentation to prove the money is a gift and not a loan.
- A list of your debts: Your debt-to income ratio (the amount of debt you have compared to your income) is one of the main things a lender will look at when determining what you may qualify for. To determine this, your lender will want a list of all your debts (credit card, student loans, car loans, etc.).
- Personal information: You’ll need a form of ID (driver’s license or passport), as well as your Social Security Number for a credit check.
Keep in mind: A lender is only showing you what you’re qualified to borrow. It’s up to you to decide what loan amount and monthly payment you’ll be comfortable with for the life of the loan.
Feeling confident in the steps to start the pre-approval process? Jump to part two of the process: "What does a pre-approval letter tell you?”
1 Pre-approval is based on non-verified information and is not a commitment to make you a loan by SunTrust Mortgage, Inc. Loan approval will be subject to, but not limited to, verification of all income, asset and liability information provided by you, satisfactory property appraisal, compliance with SunTrust Mortgage’s loan program guidelines and all required closing conditions such as survey and title examination.
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