It can be tough to navigate the wide array of homes for sale in the busy Atlanta market. Having a mortgage prequalification helps your real estate agent select homes in your price range for you to view. If you’re unsure how to prequalify for a home loan, it’s a good idea to speak with a loan officer and ask what you need to provide.
What information do you need?
Prequalification provides buyers with a general range for which they can expect to be approved for a mortgage loan. Preapproval is a more specific commitment to a certain loan amount. Generally, you need the same information for a prequalification or for a preapproval. The main difference is that with prequalification, you generally don’t present the paperwork to a loan officer for verification.
If you call a lender and ask how to prequalify for a home loan, you will most likely be asked to provide income verification and savings account balances. Here are the most common items requested for a prequalification or preapproval.
- Last 30 days’ pay stubs: Current income will be verified using your most recent pay stubs. If you typically receive this information electronically, a screen shot or download should be adequate. If not, your payroll department can provide official income verification.
- Last 2 years‘ W-2 forms: The annual wages reported on your W-2s provide income and employment verification.
- Most recent Federal tax returns, all pages, all schedules: You should retain a copy of your completed 1040 each year electronically or in paper form. If you are self-employed, you may also be asked to provide your business tax return and any K-1s.
- Last two months’ checking and savings account statements: If you bank electronically, you can log on to your bank’s website and print off copies of these statements to verify liquid assets.
- Most recent 401(k) or IRA statements: Retirement accounts may also be included when calculating your personal financial position because these funds may be used for a down payment. First time homebuyers can withdraw from their IRA without being subjected to early distribution penalties, and 401(k) loans are another option which sometimes makes sense for a home purchase.
Request a free credit report and check your outstanding debt, such as car loans and credit card balances. Having an idea of what type of down payment you can present will also help you answer the lender’s questions.
The final step: A mortgage loan commitment
After you find a house and sign an agreement of sale, you will formally apply for a mortgage loan. Within three days of submitting your application, the lender must provide a document known as a good faith estimate (GFE). The GFE details all the terms of the loan, including the amount, interest rate and estimated closing costs.
Getting a prequalification or preapproval is an important first step in the home buying process. If you track down all the paperwork you need before you begin, you start the process off right.
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