How to prepare for pre-qualification

You’re ready to commit to a mortgage. So what’s the next step? Either before you start making plans to find an agent or at the same time, you need to meet with your bank or lender. Pre-qualification is the very first step in determining how much house you can afford and how much a lender will be willing to loan you. There is typically no cost to pre-qualify but there is also no commitment from the lender at this point to loan you money. It’s a dry-run of the pre-approval process and will help you set important spending boundaries.

Get a handle on your financial situation and gather up all the paperwork your lender will likely want to see. Be prepared to show these documents: tax returns from the last two years; all W-2 tax forms from the last two years; all account statements, such as credit card, checking and saving accounts; three most recent pay stubs; a letter of promotion notice, if this applies to your job situation; CDs, 401k, 457 and all other retirement account statements; and identification, such as drivers license.

The information you gather can be used to determine how much house you can afford. Click here to use the online calculator.

Once you meet with your lender, he or she will determine if you pre-qualify and will explain the terms of the loan, closing costs and other inspections that may be required to secure a loan at that institution.

The next step in the homebuying process is getting pre-approved by the bank. This is a tentative commitment from the lender for mortgage funding and will be explored in greater detail in future blog posts.

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