First Time Homebuyers – Step Two
Step Two : Get Pre-Approved
It is absolutely vital to get pre-approved! By getting a pre-approval, you know that you can in fact get a mortgage, and you know exactly how much you will be able to spend.
The pre-approval process is not as hard as you may think. The first step is to review your credit report. Everyone is entitled to one free report per year. This can be done by going to AnnualCreditReport.com, or by calling 1-877-332-8228. Take time to look through this report. You should recognize all of the names on the creditor list! If you see old accounts that have not been properly closed, incorrect balances, names you do not recognize, or inaccurate late payments, get those straightened out before you go on to the next step.
Once you know that there are no errors on your credit report, it is time to talk to a lender. Either speak to your local bank, or choose a lender from my list of Approved Lenders (these lenders are all very friendly, very patient, and very knowledgable).
Try to gather together the following items prior to your first visit:
1) list of all assets and income
2) list of all debts and regular expenses
3) pay-stubs from the past month
4) tax returns from the past two years
5) addresses for the places you have lived for the past three years
6) any pertinent information about a recent divorce, foreclosure, or bankruptcy
Don`t worry if you cant find a pay stub, or if you do not know where to even start looking for last year`s tax return. Whatever you do have will give the lender a good base to start from. Use our handy Income and Expense Worksheet (coming soon) to organize your assets, income, debts, and expenses. It may seem like a lot of work, but remember you only have to do it once!
Pre-Qualification vs. Pre-Approval: Being pre-qualified simply means that you have informed the lender of your income and expenses. From those numbers they calculate a tentative maximum loan amount. When you are Pre-Approved, the lender verifies all of these numbers and includes your credit score in his or her calculation. When it comes time to actually apply for the loan, these number are all going to be verified anyway, so it is much better to get this done during the first visits, rather than risk losing a house over a financing glitch!
Once you are Pre-Approved, you and your REALTOR will be comfortable with a price range to start looking at houses.
