Getting pre-approved for a home loan is especially important if your are considering a home purchase. You’ll need a pre-approval letter before you can look at homes with a real estate agent in most cases. Sellers will also require a letter to be submitted with a purchase contract (offer).
What paperwork will I need to get a letter?
You can find a complete list of items here, the most important things you’ll need to get started and receive a letter will be a complete application, proof of your income, source of funds for down payment, closing costs and reserves if required. It’s also a good idea to write a letter to explain anything about your situation like credit issues or gaps in employment over the past two years.
The purpose of all this is to make sure you qualify for the best loan program without having to rush or scramble. If you apply well in advance your mortgage broker or lender will have time to recommend a better program or to pay down credit cards if needed. You’ll also be able to avoid paying for deposits and inspections without assurance you’ll qualify and meet the lender’s guidelines.
Once you get a letter you can get a contract, pay for appraisals and deposits with assurance your loan will likely be approved during the more in-depth underwriting process.
The next steps will be to submit your signed sales contract, updated bank statements and pay stubs. Then receive and sign off on the loan disclosure forms. Finally the underwriting team will issue a conditional approval which will list all items needed in order to receive a final approval and then go to closing. The appraisal may be paid for and ordered before or after the conditional approval is issued.
As a rule of thumb the loan can be ready to close within about two weeks of the appraisal being received by your lender.
