Preapproval vs. Prequalification
In a hot market, like the one we’re in, with lots of multiple offers, having a preapproval document from your mortgage lender is essential. Without it, your offer will probably be rejected.
What is a preapproval?
A preapproval is different from a prequalification. With a prequalification, the lender relies on information provided by the buyer to estimate how much the borrower could qualify for. With a preapproval, the lender verifies the borrower's information and documentation to determine exactly how much it would be willing to lend to that borrower.
The documents to get preapproved are the same documents that you would need to get a mortgage. Pay stubs, last two years' W-2s, last two federal returns, two months' worth of bank statements of all types of accounts, plus your credit report.
A preapproval is not a loan commitment, but it helps speed up the underwriting and loan approval process
Getting preapproved before you shop for a home also allows you time to fix unexpected errors on your credit reports.
When you decide to buy a home, getting a preapproval document should be the first item on your list.
Don’t waste your time looking at homes until you have it.