What paperwork do you need to get a pre approval letter?

You are dying to buy a home, but you don't know where to start?  In my opinion, the best place to start is with a professional, experienced Realtor.  These Realtors know the area, the market, and will put you in touch with lenders with exceptional experience.  Think about it - why would a Realtor recommend you to a lender that would not work the best for you? As part of our code of conduct, we do not and cannot accept "kickbacks" from lenders. Our reputations depend on the full service we provide to consumers and no one likes to waste time!

Oftentimes clients come to me with a pre qualification letter and they mistakenly think they have been fully pre approved for a mortgage loan.  In interviewing them further, they tell me that they have only verbally gone through the application process, or worse, they filled out an online form and provided exaggerated income, unintentionally, including sporadic overtime into their weekly pay.  In order to get a full, good pre approval that  a seller would feel confident in accepting your offer over another, a pre approval letter should state that "credit, income & assets have been verified."  A pre qualification letter usually says "this letter is based on information you have provided to us, but has not been verified".

In this competitive buying environment, a pre approval letter may give you the edge over a buyer who only has a pre qualification letter.  How do you get that? Well, before applying, this is the time to get organized. Hold onto pay stubs & gather your past tax returns. Lending guidelines have dramatically changed over the last several years.  Gone are the days when you could just write a letter of explanation for a missing document.  

Here is a list of the documents you will need from each borrower to get a pre approval letter:

• Pay stubs  - best to have the last month handy and keep them going forward.
• W2's - at least the last 2 years, and if the year has rolled over, be prepared to provide the most recent.
• Bank Statements - the last 3 months, all accounts, all pages (even if blank). Keep them going forward.
• Tax Returns - at least the last 2 years and if the year has rolled over, be prepared to provide the most recent.
• Investment Statements - 401k Statements - Trading Accounts: The last 3 months
• If you're self employed - Have a profit & loss statement available from the last filed tax return.

If you're renting:

• Have copies of the last 12 cashed rent checks
• Copies of all your bank statements showing the money has been taken out. 
• In some cases, if the landlord doesn't cash the check right away, you may need to provide a letter from your landlord stating that all your rent checks were received on time. You'll also need to provide your landlord's contact information.

If you are living with relatives and don't pay rent:

• Get a letter from your relative explaining that they don't charge you rent, or that help in the care of the property is the only exchange of value in your arrangement.

If a portion of your down payment is a gift from a relative:

• Have a copy of that check and a gift letter.  The gift letter is from the giver and states that this money was gifted to you without any expectation of repayment.

If you have spoken to your lender about borrowing against your 401k and they said it is allowable:

• Make a copy of the check you are depositing and provide an updated bank statement showing the money has been deposited into your account and is available for withdrawal.

Basically, your finances need to be completely transparent to your lender.  All money in and all money out needs to be accounted for.  Work closely with your lender. Provide the requested documentation in a timely manner and update as you get each new pay stub and bank statement. Lending guidelines change frequently!

As always, if you are looking for an exceptional Realtor and Lender, contact us and we would be happy to reach out to our network to find the best team for your needs. Watch for my next article explaining about what you should not do while in the mortgage loan application process, coming soon!