Unless you’re able to make an all-cash offer on a home, you’ll need to get approved for a mortgage to finance the purchase. The first step toward getting a mortgage is applying for preapproval. You’ll need a preapproval before you start seriously shopping for a home. Your lender verifies some of your financial information, including your income, your credit history and current debt to determine how much home you can afford when you apply. That means you’ll need to submit specific documents for the mortgage preapproval, such as pay stubs, bank statements and tax returns.
Don’t confuse prequalification and preapproval. A prequalification is useful when you’re in the early stages of buying a home and trying to figure out a budget, but you’ll need a preapproval when you’re shopping for a new home.
Your lender then issues you a letter with an official estimate of how much of a loan they’re willing to offer you.
What Is A Preapproval Letter?
Your preapproval letter indicates that you’re serious about buying a home. Agents and sellers know you won’t have trouble getting a loan after your offer is accepted. Your preapproval letter helps you to strengthen your offer when you find the right home by showing the seller that you have the financial means to afford the home.
Although the amount you see on your initial pre-approval letter will be your max loan amount, if you’d like to be able to show a lower number to sellers, your lender will likely be happy to work with you to generate a letter that shows a lower amount. For example, if you’re preapproved for $300,000 but plan to offer $250,000 on your dream home, you may be able to get a letter that shows $250,000. This way, there will be less risk to you of the seller countering with a higher amount.
What Is A Verified Approval Letter?
At Rocket Mortgage®, we take your approval application very seriously. During our Verified Approval1 process, we’ll pull your credit and ask for documentation verifying your income and assets, including your W-2s, income tax returns, pay stubs and statements for any accounts you want to use as assets.
Most preapprovals are based on automated systems. The Verified Approval process, on the other hand, includes review by an underwriter.
Because we take the time to verify the information you provide, our Verified Approval Letter is a strong indication that a borrower who has been approved will close on the mortgage. This Verified Approval Letter will separate you from the rest of the mortgage-seeking pack. In fact, if through no fault of your own your application doesn’t lead to a closing, we’ll pay you $1,000.
