Do I Need a pre-approval

What is it?

Let’s start with “what is a pre-approval?”. A pre-approval is a document provided by a lender that indicates a possible loan amount the lender would make based on an application provided by a borrower. Things like your income, credit score, and debt to income ratio might be used to determine an amount that you could be pre-approved for. But, it is not a commitment to loan you that amount for a specific purchase.

How do I get one?

Many lenders have an online application process. Here are some things most lenders will want to know.

. Proof of income

. Employment verification

. Proof of assets

. Credit history

. Identification

. Debt-to-income ratio (DTI)

How does it help me?

Well, it gives you a number that a lender may loan you based on the criteria you supplied. Lenders may also give a rate that they would expect to give you on an actual loan. So, you now have a maximum amount you can borrow and you can calculate what your monthly payment is likely to be. This helps in setting your criteria when searching for a home.

How do I use it?

Many real estate agents will ask to see a pre-approval to schedule showings. They want to be sure that you can afford their listing before they schedule their time and their owners time. Your buyers agent will probably be handling this for you.

If you decide to make an offer on a property, you will be required to include a pre-approval or proof of funds as part of you offer.

The bottom line.

A pre-approval will help you identify your financial limits when setting your search parameters for your new home. It is the pass you need to set up showings and it is an essential part of making offers.