Why is it Important to Get Pre-Approved?

Preapproval from a trusted lender like United Wholesale Lending is a powerful tool for homebuyers and is recommended before you even begin home shopping.

Pre-Approval provides clarity on:

1. Understanding your budget – At United Wholesale Lending, it is important for us to help our borrowers understand their finances and, based on factors like income, debt, and credit history, determine how much you’re qualified to borrow.
2. Home financing peace of mind – Being pre-approved for a loan can give you clarity and confidence in your ability to secure a loan, and a competitive edge in a bidding war.
3. Distinguishes you in a competitive market – For the sellers, a preapproval makes you an attractive buyer as it shows sellers that you are financially capable of purchasing their home, giving them the peace of mind that your offer will stand.
4. Increases your buying power – With a pre-approval, your real estate professional will know you’re a serious buyer and understand your budget, helping narrow your home search to homes that are the right match for you. It can save you from the heartache of falling in love with a home you can’t afford while letting your buying agent know that you’re ready and able to make an offer on a home anytime, anywhere.
5. Expedites your closing experience – smoother, stress-free closings – getting you into your new home that much sooner.

Pre-Approval Defines You A Serious Buyer!

Having every advantage as a buyer in today’s competitive real estate market, especially with a pre-approval letter, will always distinguish your seriousness to commit. Going through the financing process before you start your home search will set you up for success. We often walk our clients through a process to help them understand the competitive and practical advantages of the pre-approval process and having a preapproval letter upon submitting your contract to make a purchase. You’ll firstly be considered as a serious contender for a home, which is why this is a top question asked by realtors to their clients, as it provides better odds for your offer to be accepted. Along with having a competitive advantage, you’ll also know the maximum amount you can borrow to guide your search efforts, saving you valuable time. This is especially helpful when you’re trying to narrow down what kind of home you can specifically afford removing uncertainty. You’ll be privy to any credit issues via your credit report which can impact your qualification. When you work with a trusted lender, you will understand your loan options and budgets, allowing you to move through the home buying process much more comfortably.

How Strong is a Prequalification?

Contrary to what one may have heard, prequalification does not involve a thorough check into your income and credit. This tool is basically used by buyers who are just starting to explore and want to know what size loan they could qualify for. At United Wholesale Lending, we help you review your credit status, debt-to-income ratio, and review your overall ability to make a home purchase. This allows us to estimate whether you can qualify for a mortgage and what size loan you would be eligible for making a strong case for your new home or investment.

What You Can Expect For Pre-Approval

Requirements for getting pre-approved on a home loan consist of working with a trusted home lender, like United Wholesale Lending, and sharing your financial information (for example, your income, debt, and undergoing a soft credit inquiry which is not the same as a hard credit inquiry). Generally speaking, you can normally expect to be asked the following things in your pre-approval process with a lender:

1. Credit – For conventional loans, most lenders will require a FICO score of 620 or higher for approval. You should research your DTI (debt-to-income) ratio while getting prepared for pre-approval since this will be a determining factor moving forward. This quantitative data shows lenders how much money you spend versus how much money you have coming in. In order to calculate your DTI, you take the sum of your monthly minimum debt payments then divide that by your monthly pre-taxable income. Depending on your lifestyle this process may prove to be a bit tedious because you would not include all monthly payments. Things such as healthcare premiums, utilities, contributions to 401K or savings accounts, and other payments are not included in calculating DTI. For this reason, it’s best to find a DTI calculator through a reputable service provider to get accurate results. To give you a ballpark number, you should have a DTI of 50% or less to get the most mortgage options. Most home lenders focus on what is called “back-end” DTI which includes your minimum required monthly debts that would show up in your credit report in addition to your future monthly mortgage payment.

2. Proof Of Income – As you may already be aware, most applications for anything are mostly always going to want your proof of income so it’s better to be prepared to provide recent payment statements that show monthly income along with year-to-date income, recent tax returns (usually the two most recent), and any other documentation of payments like bonuses.

3. Employment Verification – With payment statements from your employer, lenders will confirm your employment by contacting them and verifying employment and salary. If you recently switched jobs, they possibly will contact your previous employer to confirm your employment and salary with that company. If you’re self-employed, you will likely need to provide different business details that show your business is positioned to continue supplying your stated income, along with your most recent tax returns.

4. Proof Of Assets – Home lenders want to confirm you have the assets required to cover the down payment and closing costs if you don’t have that covered already, and that you have adequate cash reserves for anything that may come up. This will require proving the lender with statements from your bank and/or investment accounts.

5. Other Documentation – Always be prepared to provide a driver’s license or other accepted alternative such as a current passport. Lenders also need your social security number and your signature which will allow them to perform a credit report as aforementioned. The faster you provide this information to your home loan lender the quicker you will complete the preapproval, and the sooner you can land your new home.

In today’s market, connecting with a trusted lender like United Wholesale Lending to get pre-approved for a home purchase may be the defining element that helps you secure your dream home. What questions about home loan pre-approvals do you have?

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