While looking for a home can be thrilling and enjoyable, serious homebuyers should begin their search at a lender's office rather than at an open house. Most sellers anticipate buyers to have a pre-approval letter and will be more likely to work with those who can demonstrate that they can get financing.

To be pre-approved for a mortgage, potential buyers must provide papers proving their assets and income, strong credit, and employment verification, among other things.

Here are the things you need to get pre-approved for a mortgage.

1. Proof of Income

Buyers generally must produce W-2 wage statements from the past two years, recent pay stubs that show income as well as year-to-date income, proof of any additional income such as alimony or bonuses, and the two most recent years' tax returns.

2. Proof of Assets

The borrower needs bank statements and investment account statements to prove that they have funds for the down payment and closing costs, as well as cash reserves.

The down payment, expressed as a percentage of the selling price, varies by loan type. Many loans come with a requirement that the buyer purchases private mortgage insurance (PMI) or pay a mortgage insurance premium or a funding fee unless they are putting down at least 20% of the purchase price. In addition to the down payment, pre-approval is also based on the buyer's FICO credit score, debt-to-income ratio (DTI), and other factors, depending on the type of loan.

3. Good Credit

Most lenders require a FICO score of 620 or higher to approve a conventional loan, and some even require that score for a Federal Housing Administration loan. Lenders typically reserve the lowest interest rates for customers with a credit score of 760 or higher. FHA guidelines allow approved borrowers with a score of 580 or higher to pay as little as 3.5% down.

Those with lower scores must make a larger down payment. Lenders will often work with borrowers with a low or moderately low credit score and suggest ways to improve their score.

4. Employment Verification

Lenders want to make sure they lend only to borrowers with stable employment. A lender will not only want to see a buyer's pay stubs but also will likely call the employer to verify employment and salary. A lender may want to contact the previous employer if a buyer recently changed jobs.

Self-employed buyers will need to provide significant additional paperwork concerning their business and income. Typically, self-employed borrowers need to produce at least the two most recent years' tax returns with all appropriate schedules.

5. Other Documentation

The lender will need to copy the borrower's driver's license and will need the borrower's Social Security number and signature, allowing the lender to pull a credit report. Be prepared at the pre-approval session and later to provide (as quickly as possible) any additional paperwork requested by the lender.

Consulting a professional at this stage is necessary. Let me know if you need assistance. Send me a message now.