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Are you ready to buy your dream home? Find out what you need to get a pre-approval letter to streamline the process.

Here’s an all too common scenario for first time homebuyers: you decide it’s finally the right time to buy a house only to fall in love with one that goes to another homebuyer who was a step ahead. What is that crucial step that can be the difference between fulfilling your homeownership dreams and disappointment? It’s a single piece of paper that has enormous impact: the mortgage pre-approval letter.

At 1st United Mortgage, our team is dedicated to helping you avoid the heartbreak and streamline your overall mortgage experience. That’s why we take time to be sure our clients understand the whole process, especially the mortgage pre-approval letter.

What Is A Mortgage Pre-Approval Letter?

If you are just entering the process of buying a home, you may have heard both the terms pre-qualified and pre-approved. Here’s the difference between the two:

  • Pre-qualified – This is an initial step where you provide an overview of your financial information to a lender to get an estimate of what you could qualify for in terms of a loan. Often, there is no verification and the information is self-reported.
  • Pre- approved – This step involves providing documentation around your financial history including income, assets, debt and credit score.

Though these may seem interchangeable, they have very different meanings for home sellers considering your offer. Pre-qualified indicates you have just started the process and may or may not actually be able to secure the financing you need to close the sale. Pre-approval shows that you have already secured financing and are therefore a serious buyer.

Obviously, sellers are far more interested in offers from buyers with mortgage pre-approval letters. This step reduces the overall chance for the closing to fall through.

What You Need For A Mortgage Pre- Approval

Credit Score

It’s no secret that the higher your credit score is the better chance you have for not only getting pre-approved but receiving a lower interest rate for your mortgage. Though many lenders require a credit score of 620 or higher, FHA loans and VA Loans have more flexibility and you can get a loan with a lower score. At 1st United Mortgage, we review a variety of credit worthy sources to make a final underwriting decision. These include factors like rent and utility payment history.

Proof of Income & Employment

You’ll need to provide at least two years worth of income verification. That means you can use W-2 statements, tax returns or pay stubs. Lenders want to be sure your income is consistent and has been so for awhile.

Lenders will often contact your current employer to confirm your employment status and income. Again, the primary concern for a lender is certifying that an applicant will be a reliable borrower.

Asset/Debt Information

VA Loans are among the last of the no money down loan programs, but they are only available to veterans and active military members. That means most homebuyers will need money for a down payment when purchasing a house. Lenders will require investment account and bank statements to verify you have the funds necessary for your down payment. Typically a down payment of 20% is suggested, or the lender will also require PMI (Property Mortgage Insurance) for your mortgage.

Lenders are also checking your debt-to-income ratio. This is found by taking all your monthly debt payments and dividing that by your gross monthly income. This formula is how lenders ascertain your ability to pay back your monthly loan amount. Evidence suggests that borrowers with higher debt-to-income ratios are more likely to have difficulty with their loan repayment.

If you’d like to learn more about mortgage pre-approval letters or the homebuying process, contact us today to speak with a mortgage specialist about how to apply.


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