As many people embark on that journey towards home ownership, attention to mortgage pre-qualification documents and early actions to pre-qualify for a home loan are common and low risk. Typically, to prequalify for a loan there should be no upfront costs or hard inquiries that may affect your credit report.
Think of this process as nothing more than an introduction to the loan choices that are out there. Once you get past this introduction, the relationship between you and a loan gets a little more serious as you move towards the mortgage pre-approval phase.
It isn’t until the pre-approval phase that you might expect to provide more in depth information about your financial history. In this step of the home loan process, HSH notes that it is normal for a mortgage broker to request copies of your earnings statements, tax filings, proof of any assets, and basic information that details any debt. This information is used to create a borrower profile that helps direct just how much house you can buy (in terms of price) and what your interest rates may look like.
A buyer that approaches a realtor who may be selling a property will often be taken more seriously if their financing is in a pre-approved status than someone who is merely pre-qualified. Logic dictates that a pre-approval is farther along in the mortgage process than a pre-qualification. In cases of a property that has multiple buyers in competition, having a pre-approval in hand before the first discussion helps weigh the scale closer to your favor.
To obtain that pre-qualification, the actual paperwork that you have to provide is extremely basic and does not require a hard credit check. Things that typically get you through this stage, as far as mortgage paperwork goes, is basic information that highlights what your income is, you address and how long you have lived there, basic information about monthly debt obligations and an overview of your accounts. As you move from pre-qualification to pre-approval, take note of the 7 documents you need when applying for a home loan.
To reiterate, you are not going through the official, formal loan approval process at this point. Pre-qualifying is a simple step that merely gets you one step closer to where you need to be. In some cases, pre-qualification is just a part of the overall learning process where you better understand what your purchase power may be as you shop the real estate market.
To break things down, the items below are the specific data points that a mortgage professional will need:
Again, being as this is not the formal mortgage approval process, much of this information is estimated and unsupported by documents such as your W2 or credit report. The pre-qualification process strives to put together a high level assessment of whether or not your expected down payment, earnings, and debt-to-income ratio falls within your FHA or conventional mortgage requirements.
Pro Tip: After you speak with a mortgage expert, it is common for buyers to request a pre-qualification letter. Once you have this, provide it to your realtor to show them just how serious you are when it comes to making a home purchase.
The more serious your realtor believes you to be, the harder she will work to find you the perfect home.