What Do I Need to Prove I Can Buy a House?

You will need a Pre-Qualification Letter, Pre-Approval Letter or Proof of Funds Letter when you buy a house!  Do you know which one works for you?

Buying a home is certainly one of the most rewarding experiences you can have.  It is also one of the most challenging.  If you are buying for the first time, the process may seem overwhelming.  Even if you have been through it before.  It is an emotional time filled with difficult choices and decisions.  The process may have also changed since you last bought a home.  Every home purchase is different and will have its challenges.

A Pre-Qualification means that a lender has evaluated your creditworthiness and has decided that you probably will be eligible for a loan up to a certain amount.  It's usually just an approximation.  It's usually only based on the brief information that you verbally give to the lender.  It may not always consider your other financial situations that may be attributed to you.  It is merely a financial snapshot that gives you an idea of the mortgage that you might qualify for.

A Pre-Approval is much better and the real deal.  It is a statement from the lender that you qualify for a specific mortgage amount based on an underwriter's review of all of your financial information; credit report, pay stubs, bank statements, salary, assets, obligations.

A Pre-Approval should mean that your loan is contingent only upon the appraisal of your home and final approval.

In most cases, cash will usually win, but a Pre-Approval is the next best thing!  With a cash offer, you should have some type of proof of your cash funds available when you start looking for a home.  It will be imperative if you want to write an offer.

Most of the time, the seller will not wait for you to get your pre-approval or proof of funds.  If there is another buyer that is already prepared, they will take the other offer!




Pre-Approval Checklist (generally)

Income Statements-Pay Stubs, W2s, Profit and Loss Statements, Tax Returns (2 years normally), Social Security/Disability Income, Bank Statements (2 months normally), Retirement Statements, Valid Driver's License/State Identification.  If applicable, Divorce Decree, Bankruptcy Documents, Foreclosure Documents, Alimony.

Common Buyer Closing Costs (refer to Purchase Agreement)

Down Payment, Loan Origination Fees, Points/Discount Fees, Home Inspection, Home Appraisal, Credit Report, Private Mortgage Insurance (if putting less than 20% down payment), Escrow (homeowner's insurance and property taxes), title insurance, deed recording, property tax prorations, real estate fees.

If you want to learn more about the buying process, please let me know.  Being prepared helps to make you a better buyer.