If you have been following the housing market during the time of this writing you will most certainly have noted that housing prices are higher and interest rates are too. How can a buyer position themselves to be in an excellent position to purchase a home? A buyer needs a pre-approval letter from a lender to validate proof of funds to a seller.
Basic requirements for a pre-approval letter from a lender.
1. Proof of income: Most lenders want potential homebuyers to provide W-2 wage statements and tax returns for the past two years, current pay stubs and proof of any additional income.
2. Proof of assets: A bank or investment statement showing they have the funds required for the down payment, closing costs, and cash reserves.
3. Good Credit: Most lenders require a FICO score of 620 or higher to approve a conventional loan; while a score of 580 for Federal Housing Administration loans.
4. Employment verification: Lender require the buyers to provide pay stubs but will in most cases contact the employer directly to verify employment and salary.
5. Other documentation: Personal documents and identification required for pre-approval include the borrower's driver license, Social Security number, and authorization to run a credit report.
Bottom Line:
Based upon the information provided by the borrower, the lending institution will provide a decision to either pre-approve or pre-approve with conditions the loan. If denied, the lender will explain why and offer options to improve the borrower's chances for pre-approval.
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