This is one question I get from a lot of my borrowers when they start the pre-approval process.
Before I give you the answer, we will first start with what a “genuine” pre-approval is and why you need one.
What is a “Genuine” Pre-Approval?
A genuine pre-approval verifies 3 financial components:
- Credit
- Income
- Assets
The following documentation is needed to obtain a genuine pre-approval.
Credit
We will need to run a credit report to find out your credit score and your continuing liabilities. Your continuing liabilities (ie….credit card payments, car loans, equity lines, student loans, etc….) and your credit score will determine what loan programs are available to you and will be a determining factor in how much of a mortgage payment you can afford on a monthly basis.
Income
We will verify your income by reviewing:
- Your pay stubs covering one full month. Your pay stubs will need to be computer generated and show your Year to Date income.
- You will need to provide your past 2 years of W-2′s (for 2009: you will need 2007 and 2008′s W-2s)
- Tax returns for the past two years (for 2009: you will need 2007 and 2008′s returns)
Verifying your income will determine your maximum loan amount and what monthly mortgage payment you can afford at comfortable level.
Assets
To substantiate your assets:
- Last 2 months bank statements from your checking, savings, investment and retirement accounts
Your assets will determine how much you have available for down payment, closing costs and any reserves required by the lender.
Why Do You Need a Genuine Pre-Approval?
When you have a genuine pre-approval, you are essentially a cash buyer to a seller. Most seller’s agents will call the buyer’s lender to verify the validity of the pre-approval letter. They will ask questions like “Have the buyer’s assets, income and credit been verified and substantiated?” If the answer to that question is no (and it is with most “pre-approvals” issued today), you have just become a liability to the seller because you have not been pre-approved for the loan. And, if there are any other interested parties making an offer on their house with a genuine pre-approval, likely they will chose them because they know that borrower can get the loan.
Remember, the key to successful home buying is to find a loan first and then find a home.
How Long is a Pre-Approval Good For?
How long your pre-approval is good for is lender specific, but on average it’s about 60 days.
What Happens if You Don’t Find a Home in 60 days?
If you don’t find a home and close a loan in 60 days, this doesn’t mean you have to start the pre-approval process over again. It simply means you’ll have to update your file. You will have to provide updated pay stubs and bank statements. Also and depending on the lender, they may have to pull another credit report. As long as your situation has not changed, (i.e….a drop in income, additional debt or a substantial negative changes in your assets) your pre-approval can be reissued easily.
Remember, each lender has their own requirements when it comes to the expiration of a pre-approval so make sure you have this discussion with your Mortgage Advisor.
Ready to Get Started with the Genuine Pre-Approval Process?
If you’re ready to get started with a genuine pre-approval, contact me at info[@]SanMateoMortgageBlog.com or (650) 520-0915 to schedule a free, no obligation consultation. If you’re ready to go ahead and start the application process, visit our secure online application.
Think You Have Something Other Than a Genuine Pre-Approval and Want a Second Opinion?
We’d be happy to review what you’ve received from another lending institution and give you a second opinion. If you’d like an expert, no pressure second opinion, contact me at (650) 520-0915 or by email at info[@]SanMateoMortgageBlog.com and we can schedule a time to go over what you have. If what you have is a genuine pre-approval, we’ll tell you and send you on your way!
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