What You Need Be Pre-approved for Mortgage.

Real estate is one investment strategy that requires a good amount of capital to get through.

Land is expensive, houses are expensive, and building a home is expensive. Real estate investing is not a 2 dollar investment.

Some people are lucky to have more than enough to buy a home or invest in any other type of real estate while others don’t. And, that is why most people look for ways to finance their property acquiring process through mortgage and loans.

There are several financial institutions known for providing mortgage and loan services to qualified individuals. They include banks, SACCOs, Credit and Microfinance Unions, savings and loan Associations. Investment companies, mortgage companies, and insurance companies.

Getting a mortgage from these institutions is not among the easiest things to do in the investing world. People take a significant amount of time to get a mortgage or to even qualify or get approved for one.

Sometimes individuals slow the mortgage process by themselves by not having what is required. Before the lender pre-approves you for a mortgage, you need to be ‘qualified’ for one first.

Being approved means that all your documents have been verified and you can get a loan from the lender.

Most people selling a real estate property require your ‘pre-approval’ documents from a lender. This is to be sure you have financing before they get into any type of negotiation with you.

The same goes for planning to build your own property. You don’t want to start building a home or a rental property without an assured source of capital.

These are the main requirements a lender will need to pre-approve a mortgage for you. Having them at hand makes the mortgage process a little bit easier and faster.  

Proof of Income.

No serious lender can lend you money in the form of a mortgage without proof you earn an income.

Lenders need to be sure you have the ability to pay back their mortgage and this is through a source of income.

Most lenders will ask for your payslips or wage statements from the last year or two, depending on their requirements. They will ask for proof of any other additional income such as allowances and bonuses from work or from clients.

The lender will also need to see your tax returns for the last couple of years of your tax returns.

Proof/verification of Employment.

Your proof of income goes hand in hand with your proof of employment. Lenders want to give mortgages or loans to people with stable employment.

As a borrower, you need to provide documents that verify your employment status. You are either employed or you are self-employed and you run your own business or company.

For the employed, the lender will need documents from your employer verifying your employment with the company. Alternatively, the lender will probably contact your employer to confirm your employment in the company and your monthly salary.

On the other hand, if you are self-employed, the lender will need proof of a stable income. They will need documents that show the type of business you are running, your products, and your location.

Documents that show your business’ tax returns will also be required by the lender.

The lender needs to know whether your business is strong enough financially and able to provide you enough/ stable income to pay your mortgage.

Proof of Assets.

This one is a must in getting pre-approved for a mortgage as a borrower.

The lender needs to be sure that you are able to make a down payment for the mortgage, pay for the closing costs and the reserves too. And, the only way they can be sure is through the proof of your assets – anything you own that has a monetary value to it.

Make sure you include all the cash at hand or cash equivalent assets you have as you apply for a mortgage. You need to provide bank statements of all open bank accounts and statements from all your investment accounts.

Include your physical assets – land, house, home, commercial building, cars, etc. – anything physical/ tangible that can be exchanged for money. Mention your Nonphysical assets and liquid assets that you can instantly convert into money –bonds, pensions, and stocks you have invested in.

Consider listing your equity and fixed income assets too.

The assets you have will determine the type of mortgage you can receive as a borrower and the interest rate you will pay for that mortgage. Obviously, if you have many assets, you are likely going to get a good mortgage with a favorable interest rate.

Good Credit Score.

Your credit score will determine the amount of mortgage you will get from the bank or a credit and savings union.

If your credit score is low, you are not likely going to get a high mortgage and you are probably going to make a huge down payment for your mortgage.  You will likely pay more interest than the buyer with a good credit score.

On the other hand, if your credit score is high, the lender will not hesitate to give a high mortgage as your credit score speaks for you. You are also going to get a low-interest rate compared to the bad credit score guy.

In short, your credit score proves your creditworthiness as a borrower.

Your debt repayment history highly determines your credit score together with the number of debt you have taken before. the lender will need the number of open accounts you have currently and the levels of debt you have currently.

The lender will get your credit information from credit bureaus as they have all the records of your credit history.

Therefore, if you want to have a good credit score to be highly eligible for a mortgage later, take care of your debts on time.

Additional Documents.

Additional documents needed to be pre-approved for a mortgage as a borrower varies from lender to lender.

Some lenders will need to see your driving license and insurance policies.

The lender might ask for your social security number and signature to enable them to get access to your credit score from credit bureaus. 

If you are getting a mortgage to build a home, some lenders will need extra information such as your marital status, etc.

The variation is highly determined by the type of financial institution your lender is and the criteria they use.

Conclusion.

Almost all lenders require the same information to pre-approve you for mortgage/ loan and the above requirements are the basics.

Depending on your lender and their mortgage application criteria, the requirements might differ when it comes to additional information.

Being pre-approved for a mortgage can take a while and can be harder than you think without the needed paperwork or information. Having the needed information will make your mortgage application a little faster and easier.

Getting all the documentation is also not the easiest thing to do and needs some planning, patience, and diligence.