As a first step in actively searching for a home to buy, it pays to obtain a lender's pre-approval. This is a lender's commitment to fund your mortgage loan at a pre-set interest rate and for a fixed period of time. The lender will have evaluated your credit history, income, personal balance sheet and employment history, and verified that you have the necessary down payment.
Pre-approval qualifies you as a serious buyer in the eyes of a seller or real estate agent, and gives you additional negotiating leverage, particularly if the seller is unable to find other pre-approved buyers. This may help you get a lower sales price. You can obtain a pre-approval from a lender on the Web almost as easily as obtaining one from a traditional branch lender. Of course, with a Web-based lender, you'll need to submit the necessary paperwork.
If you aim to get pre-approved online, it's very important that you don't misrepresent the facts. If the lender later learns you have misrepresented or omitted information, he can rescind a pre-approval.
As part of the pre-approval process, your lender will obtain your credit report from one of the three major credit services. You should be familiar with the contents of credit reports from all three credit services because gaps in information sometimes exist. For more on managing your credit and using credit services, visit:
Armed with a pre-approval letter from a lender, consider using FinanCenter.com's calculators to help you calculate how much of a home you can afford:
You can obtain a lender's pre-approval at a mortgage loan Web site, through a mortgage broker, or at a local branch of your bank. To help a prospective lender make a pre-approval decision, you'll need to submit a minimum of the following:
Loan application
Federal and state income tax returns
Means of income verification
Employment history verification
Bank account balance verification
Credit report
You generally need to submit income tax returns for the most recent two years and show evidence of your salary. Providing your lender with bank account information on the loan application allows him to verify your assets and availability of a down payment.
If you are denied a pre-approval, investigate immediately. Without one, your chances of obtaining a mortgage loan are jeopardized. If the lender says your credit report was the reason for denial, call the credit service for a free report. Be prepared to call the creditor who has recorded a blemish on your credit report.
