Getting pre-approved for a home loan is essential in today’s home buying environment. Doing so shows sellers and real estate agents you’re a strong and serious home buying candidate. Some real estate agents won’t accept a purchase offer from buyers without a copy of their preapproval letter.
Loan preapproval also gives you a clear sense of your purchasing power and what it will take to get to closing day. Preapproval is a more involved process than prequalification. Other than pulling your credit reports, lenders will rely on your word and your best estimates during prequalification.
During the preapproval process, lenders will look to verify and document information. You’ll typically need to provide various financial documents like pay stubs and bank statements and sign non-binding forms and paperwork. Lenders will look at the cold hard numbers and create a realistic picture of what you can afford.
You have a lot of control in this area. The faster you return paperwork, the faster your loan process moves.
Documentation Needed For Mortgage Pre-Approval
So let’s briefly look at some of the documentation you might need to get pre-approved. Some of the things you may need to submit include a copy of your government-issued photo ID, typically a driver’s license.
For veterans, a copy of your separation paperwork otherwise known as the DD-214 is also required. Some national guard and reserve veterans may also need to provide their point statement or similar paperwork.
For active military, lenders will look for a statement of service signed by your commanding officer. There isn’t a standard form for writing a statement of service, so talk to your loan officer about what information to include.
Lenders will want to look at your recent pay stubs and bank statements. For active military, your most recent leave and earnings statement. You may also need to dig up your last couple of W2s.
Lenders Are Looking To Document A Stable And Reliable Income
If you receive VA disability or social security income, you may need a copy of your awards letter documenting the monthly amount. If you’re paying child support or alimony, lenders will want a copy of your divorce decree and court papers detailing the amounts paid. And if you have children, lenders may need a written statement detailing your childcare expenses or explaining why you don’t have any.
This is just a snapshot of some of the documents and paperwork you might need for loan preapproval. The goal here is that lenders get a look at your VA loan eligibility, your income, your debts and your overall ability to handle a mortgage payment.
Once they’re able to verify this key information, if everything looks good, the lender will say congratulations, you’re pre-approved for a VA loan up to some dollar amount. That amount is based on what you can afford while meeting requirements for things like debt to income ratio, residual income and more.
Important Things To Understand About Pre-Approval and Pre-Approval Letters
Your lender will issue what’s known as a preapproval letter. There are a couple of important things to understand about preapproval and preapproval letters.
Firstly, these are a big deal to sellers and real estate agents. They want to see offers come in from buyers who’ve been pre-approved. That pre-approval letter gives sellers the confidence that you have the credit and finances it takes to get to closing.
The other important thing to understand is that getting pre-approved for a VA loan doesn’t in any way guarantee you’ll get that loan. Preapproval is not the same thing as approval. It’s not binding, and it’s not a guarantee. Most pre-approval letters will include a set of conditions that have to be met for the lender to issue a home loan.
Still, getting pre-approved is a big step. It puts you in the driver’s seat to spring into action once you find the home you love.
Source: Veterans United On YouTube.