Usually, a mortgage pre-approval can be completed within 24-48 hours, and the steps to obtaining a mortgage pre-approval are fairly straightforward. You’ll have various options to choose from, including Conventional, FHA, and Jumbo loan programs with fixed and adjustable rates.
In the article below, I cover all the essential information you need to ensure your pre-approval process is smooth and seamless. It may seem a bit overwhelming for First-Time Homebuyers but stick to the steps below and the process will go smoothly.
1. Gather Your Financial Documents
The first step to getting a mortgage pre-approval is to gather your income, asset, and other documentation.
If you haven’t already, you should take the time to learn some key mortgage terms before you begin our four-step process. It will put you in a better position to navigate the pre-approval process, and you’ll better understand what the Loan Officer is saying and doing.
I’m going to break down the first step into three groups. The reason for this is that each group will provide a different set of documents to the Loan Officer. Find your group below, then gather the documents being listed.
W-2 Employee
- Your most recent two years of W-2 forms
- Your most recent two paystubs
- The two most recent asset statements from which your down payment will come from
- If different, the two most recent asset statements from which you will pay the closing costs from
- If you have a side business for which you file an IRS return then obtain the two most recent returns
- Make a copy of your Drivers License
Self-Employed
- Two most recent years of tax returns. All pages, all schedules (federal) including your schedule K-1 if you received one
- The two most recent asset statements from which your down payment will come from
- If different, the two most asset recent statements from which you will pay the closing costs from
- If you receive a W-2 from a part-time job; the most recent two years of your W-2 and the most recent two paystubs you’ve received
- Make a copy of your Drivers License
Retired or on Disability
- Two most recent years of tax returns. All pages, all schedules (federal) including your schedule K-1 if you received one
- The two most recent asset statements from which your down payment will come from
- If different, the two most recent asset statements from which you will pay the closing costs from
- Your benefit statement (aka awards letter) for the retirement income (or disability income) you are receiving
- Make a copy of your Drivers License
*asset statements could be your checking account, savings account, or any other liquid asset account from which you can draw funds from
Having the above documentation ready to go BEFORE you obtain your quotes will really help with your pre-approval process. Let’s move on to Step Two!
2. Find Three Highly Rated Mortgage Companies
The second step is to find three highly-rated mortgage companies for your mortgage quotes.
There are various things you can do to find great companies to work with. Reach out to friends, family, and your realtor, and use reputable online services like the Better Business Bureau to find the top-rated mortgage companies in California.
Obtain the contact information of three mortgage companies and reach out to them to let them know you are looking into buying your first home. But before you call or email these companies, you’d need to spend five to ten minutes researching their Loan Officers and handpick the Loan Officer you want to work with.
Someone who is experienced is so important to the pre-approval process.
3. Pick Your Mortgage Partner
Here is what you need to do to choose which mortgage company you want to work with for your mortgage pre-approval.
- Email or call the Loan Officers and let them know you’re a First Time Home Buyer
- Advise them that you have your homebuyer documentation ready to go
- Be clear about the purchase price range you are looking to get approved for
- Tell them the amount of money you have for a down payment (remember down payment funds do not cover closing costs)
- Let them know what loan program you would like to be pre-approved for
- Lastly, get ready to ask questions – a ton of questions
If you don’t know what loan program to be pre-approved for then just go with a 30-year fixed to start off. It’s the best loan program for First Time Home Buyers. The most important thing you can do in Step Three is to ask questions.
Why is asking questions so important? I think the answer will surprise you.
Most will answer with “because you need to understand what’s going on,” and yes, that is true and one reason to ask many questions. But the reason it’s one of the most important things you can do is that it will give you a hint as to what type of person you are working with.
If the Loan Officer avoids answering questions or is trying to rush you through the process, do you think that’s a good Loan Officer to work with? Or would you rather work with someone who will answer all your questions in detail and not rush you through the process?
Everyone would want to work with the person who will take the time to answer their questions. Having a Loan Officer you can trust is the most important thing you can have when you move forward with buying a home.
At this point, you’ll have a good idea of what these Loan Officers have to offer and what kind of terms they can provide. On to Step Four!
4. Complete The Loan Application
Step Four is to complete an application and send in your documentation so the Loan Officer can complete the mortgage pre-approval and issue disclosures which will include a Loan Estimate.
The mortgage pre-approval should only take 24 to 48 hours from when all your documentation is in, and your application is completed (unless the Loan Officer is super busy). The Loan Officer will contact you to confirm the pre-approval is complete and the terms you were pre-approved for.
Now you’re ready to make an offer, and with that offer, you can include a tour pre-approval letter. A mortgage pre-approval letter makes your offer much stronger than if you didn’t get pre-approved.
