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What Does Mortgage Pre-Approval Mean?

October 30, 2020 | By Reef Merhi

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Getting a mortgage pre-approval in Texas is one of the most important steps in the home-buying process. Although getting pre-approved is no guarantee that you’ll secure the funding for your dream home, it positions you as a serious buyer and makes sellers more likely to work with you.

There are a few reasons why you should get pre-approved before you start shopping. Here’s what you need to know before you request to be pre-approved by a lender.

What is a Mortgage Pre-Approval?

When you apply to get pre-approved for a mortgage, a lender will review your financial situation to determine how much you qualify to borrow. There are several advantages of obtaining a letter of pre-approval from your lender.

Why Bother Getting A Mortgage Pre-Approval?

Getting a mortgage pre-approval shows sellers and real estate agents that you are a serious, trustworthy buyer. While some buyers don’t think getting pre-approved is worth the extra steps, sellers ultimately want to work with financially qualified buyers who aren’t going to waste their time.

Getting pre-approved also gives you an idea of your budget so you can start shopping for homes within your price range. When you find your dream home, closing will run quickly and smoothly because your lender will already have all your information on file.

Pre-Approved vs. Prequalified

Although frequently confused, getting pre-qualified is not the same as getting pre-approved. When you get prequalified, your lender will give you an estimate of how much you can borrow.

Getting pre-approved is more official and accurate because your lender will take an in-depth look at your financial situation.

This is why sellers love seeing letters of pre-approval from buyers. It lets them know you have the chops to secure the mortgage if they decide to take your offer.

How to Get Pre-Approved for a Texas Home Loan

Getting pre-approved can be a tedious process. You’ll need to be able to verify your identity, income, and assets if you want to get pre-approved. Before you meet with your lender, you’ll need to gather the following documents.

  • Driver’s license
  • Social security card
  • Green card if not a U.S. citizen
  • Credit history
  • Employment verification
  • Pay stubs from the previous month
  • Proof of additional income
  • W-2 forms from the previous year
  • Past two years of business and personal tax returns
  • Bank statements
  • Gift statement if your down payment is being gifted to you
  • Quarterly reports from all asset accounts

Gathering all these documents can be time-consuming, but it’s worth the effort. Getting pre-approved for your Texas mortgage will make the entire home-buying process easier, so don’t be tempted to skip this critical step.

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