Couple being handed key to houseCouple being handed key to house


By: SunnyHill Financial

Have you started searching for that new place to call home?
You’ve scoured the internet for the perfect home. Taken drives through neighborhoods and pictured the new life you can build there? Before you start visiting all of the open houses, pre-approval needs to be added to the list.

What does Preapproval mean and how can it help you during your home buying journey?

Preapproval is much different that pre-qualification. Preapproval brings you much more power. This is the start of the process to qualify for a mortgage. A lender is now approving the amount they will let you borrow for a home.

This means that the lender will need access to specific financial information and access to your credit report. This will result in a hard inquiry on your credit report but should not affect your score too much, if you have a strong credit score. Once a lender has evaluated documentation, they will then approve a specific loan amount, which will help you set a price range for your new home.

These approvals usually last for a particular period of time, roughly 90 to 120 days depending on the lender.

What You Will Need… The Documentation

Proof of Assets and Income

Recent back statements and investment accounts, total monthly expenses (bills you pay), assets including 401k, IRAs, bonds, cash these are often referred to as your liquid assets, rental property income, canceled checks for rent to show payment history, gift letters.

Credit Score

Most lenders will require a FICO score of 620 or higher to approve for a conventional loan. Borrowers that have a credit score of 760 or higher tend to qualify more a much lower interest rate. If you have a lower/ moderate score this does not mean you are out of the race, our team will work with the lender to get you the best rate possible.

Employment Verification

Employment documents will need to be for the last two years. This includes your work history/places you have worked, recent pay stubs and W-2 income tax forms. If you are self-employed a profit and loss statement and business income will be requested to determine the financial strength of the business.

Personal Information

A driver’s license, social security number, marital status, contact information and address.

What Your Preapproval letter says

The items included in a preapproval letter are loan program, loan type, loan amount, purchase price, qualified interest rate and how long the preapproval offer is valid for. The reason this letter has so much power, is it shows strong commitment to other parties like agents and sellers in real estate transactions.

Please remember preapproval is the amount a lender is willing to make a loan for, it is not a legally binding commitment until you have completed the complete application process. After you have been approved it is important to keep your finances operating smoothly, avoid opening new credit accounts and keep existing lines of credit paid up without significant balance increases.

This letter is the first start in your home buying journey. It helps you plan for your new home investment and assures sellers/lenders that you are ready for this financially. Once you have this ticket in hand, it’s time to find that new, beautiful place, to call home.