When you are buying a home, you want to do everything you can to put yourself above the competition and I am going to talk about one of those things today. Before you submit an offer on a home, you will want to get a pre-approval letter or a pre-qualification letter. Let's talk about the difference and why you would want one over the other.

What is a Pre-Qualification Letter?

A Pre-Qualification letter is a quick estimate of how much home you can probably afford. Pre-Qualification is fast and easy. Basically, you will have a conversation on the phone with a lender and judging by what you tell them, they will give you an approximate amount they think you will qualify for. You give your lender a few numbers that show your income, assets and debts, and they’ll give you a pre-qualification on the spot. Note that a pre-qualification letter doesn't carry much value and a listing agent will know that the value written on the paper may not be accurate.

What is a Pre-Approval Letter?

A mortgage pre-approval is a step above a pre-qualification. It’s a thorough investigation of your income, assets, credit history, rental history and debts and will give you a concrete idea of how much home you can afford. Pre-Approval takes much more time and requires you to submit documents to the lender such as proof of income, proof of assets, they'll pull your credit, verify employment and will need your driver's license and social security number. This is much more of a hassle than just having a phone conversation, however, it is a very reliable tool to prove your purchasing power in your home offer. It is well worth the effort it takes to get.

Here is a tip. If you are ready and serious about buying a home, skip the pre-qualification and go straight to the pre-approval.

So what do you need to get pre-approved?

Here is a detailed list of what is usually required to get pre-approved. Your lender will let you know exactly what they need from you.

Proof of Income

Last 30 Days of paystubs
Last two years of W-2s
Last two years of tax returns

Proof of Assets

Last 2 months of bank statements from all of your accounts (checking, savings, 401k, stocks etc) The statements should show your name, the account number and name of the bank.

Identification

A copy of your driver’s license
Your social security number

How long does it take to get Pre-Approved?

If you have all your documents ready for your lender, you can get pre-approved that day. If you have some items you have to clean up like debt or credit, it may take anywhere from a few days to several months.

Do Pre-Approvals Expire?

YES. Mortgage pre-approvals usually expire after 60-90 days.

How much home can you truly afford?

You should note that many times a lender can pre-approve you for much more than you are actually comfortable spending. You may want to read this article called 4 important numbers you should know before buying a house.

Finding a lender

Taylor Alvarado is a mortgage broker in Dallas TX and you can contact her at taylor.mottomortgage@gmail.com to get pre-approved today! Follow her on instagram @taylorhomeloan