If you’re considering buying a home, many real estate agents and/or sellers will require a preapproval letter. A preapproval letter is different than being “prequalified”. Being prequalifed means that you have provided verbal information to a mortgage originator to get an idea of what you qualify for. Being preapproved means that you are providing documentation that supports the information you have provided. Income, employment, assets and credit are verified for a preapproval.
Some preapproval letters aren’t worth the paper they’re written on. Especially if the mortgage originator you’re working with does not require supporting documentation before preparing the letter. If you have not provided supporting documentation (listed below) to your mortgage originator – you’re probably just prequalified and not actually preapproved.
Here is a list of documents you may be required to provide in order to obtain a preapproval:
- Last two years W2s
- Paystubs covering 30 days of income
- Bank statements (all pages) and any asset accounts to document where your funds for closing are coming from (down payment and closing cost). Large deposits may have to be documented if not clearly documented on your bank statement.
- Drivers license
- Credit report (will be obtained by the lender)
- Complete loan application.
If you pay or receive child support or alimony:
- Complete divorce decree and/or child support order. If you pay alimony, here’s a reason you might want to consider an FHA mortgage.
- Last three months bank statements to show receipt of child support/alimony income. NOTE: if income is not “regular” and is not continuing for at least three years, it probably will not be able to be used for qualifying.
If you are paid commission or bonus income:
- Last two years complete tax returns
If you are self-employed, be prepared to provide:
- Two years complete business and personal tax returns
- Year to date profit and loss statement
If you have investment properties:
- Possibly pages 1 and 2 of your 1040 along with Schedule E (some lenders will require the entire tax return).
- Rental agreements
If you receive Social Security or Disability Income:
- Award letter
- Documentation showing how long it will continue
- Last three months bank statements showing receipt of income
VA Buyers: Certificate of Eligiblity/DD214
If you’re using gift funds, family members need to provide a gift letter and be prepared to show that they have the funds to gift by providing documentation such as their bank statement.
Did I forget anything? [Insert your favorite come-back here: pint of blood, first born child… ]
If you are considering buying a home or investment property anywhere in Washington, I’m happy to help! You can click here to start the preapproval process with a loan application OR click here for a free rate quote.