How You Get Pre-Qualified
So, you’ve decided now’s the right time to buy a home.
You entered your stats into an easy online pre-qual tool, the results looked good, and now you know your next step is to get a mortgage pre-qualification.
Just how do you do that, exactly?
Step 1. Find a Mortgage Loan Officer
The first step? Find a mortgage loan officer you are interested in working with for your eventual mortgage. The pre-qualification process takes you partially into the mortgage process, so it’s a good indicator of what it will be like to work through your loan application with that lender.
Step 2. Provide Proof of Income
The first thing the mortgage loan officer will ask for is your proof of income. Here’s a list of what that should include:
- Last 2 years of W-2 statements
- Last 2 years of tax returns
- Pay stubs for the last 30 days
- Documentation for any other income: bonuses, alimony, etc.
Yeah, it’s a long list — they are very thorough — but now you know, which means that now you can ace this step.
Step 3. Provide Proof of Assets
Income is important, but the mortgage loan officer also needs to see proof that you have enough funds available for the time of closing. This usually includes funds for:
- A down payment
- Closing costs
- Cash reserves
You should know how much you’re planning to put towards a down payment at this point. Requirements for different loan types can vary, from as little as 3% and up to 20%.
To prove you have the assets to cover all these upfront costs, requires documentation, such as:
- Bank statements for the last 2 months (all pages!!)
- Investment portfolio statements
Have a friend or relative who’s offered to chip in on the down payment? Lucky you! Your loan officer needs proof of this, too. Your loan officer will talk to you about the forms required to make this happen.
Step 4. Get Your Credit Checked
Next on the loan officer’s to-do list: the credit check. How does this part work? The better your credit score, the better your loan options will be.
In general, a credit score of 740 or better usually gets you the best interest rates on offer. The low end of acceptable credit scores is 580 for most FHA loans.
A good loan officer won’t just tell you your score and move on, however. You should get some helpful feedback about how to improve your credit profile or correct errors that came up.
Have your driver’s license and your social security number on hand so your lender can process your credit check.
Step 5. Find Out Your Results
This is where you find out if you have been pre-qualified and for how large of a loan you can receive. You will be issued a pre-qualification letter and some next steps. If the pre-qualification process didn’t work out like you had hoped, don’t be worried — your mortgage loan officer can make suggestions to put you on the path for getting pre-qualified.