Getting Pre-Approved to Buy a New Home

In today's market it is very important to get a pre-approval from your lender, before you go house shopping. There are two very good reasons;

1. You'll know exactly how much mortgage for which you qualify.
2. You'll have more leverage in negotiations with the seller.

Some sellers won't even consider an offer if the buyer does not have a pre-approval letter.

You may have a rough idea of how much you will feel comfortable paying on your mortgage. However, there's no easy way to translate that into a specific maximum mortgage amount because of other factors -- down payment amount, mortgage insurance, property taxes, interest rate and more. And you might not be qualified to borrow as much as you think you should be able to borrow.

Sellers often prefer to negotiate with pre-approved buyers because the sellers know such buyers are financially qualified to obtain the financing they need to close the transaction.

Most lenders can pre-qualify you for a mortgage over the phone. However, this is much different from a pre-aproval where you must fill out a mortgage application get a credit report and verify your employment, assets, etc. Here are some things you will need to provide the lender in order to get a pre-approval:
Two most recent pay stubs
W2's for the last 2 years
Federal tax returns for the last 2 years
Last 2 months' bank statements
Long-term debt information
Proof of funds for your down payment

One thing you need to remember, pre-approval letters aren't binding on the lender, are subject to an appraisal of the home you want to purchase and are time-sensitive. If your financial situations changes (you lose or change jobs, buy a new car or run up credit cards or revolving credit), interest rates rise or a specified expiration date passes, the lender will review your situation and re-calculate the maximum mortgage amount accordingly.