If you are planning to buy a home in Minnesota soon, one of the first things you will learn is that most real estate agents will want you to be preapproved before they start showing houses to you. There are several reasons for this, but perhaps the most important reason is to make sure that they are investing their time with a buyer who has the capability of buying.
Unless you are in a position to purchase a home for cash, it is a critical first step to get pre-approved for financing before you start your hunt for a new home in Minnesota.
What is a Prequalification?
In many cases a borrower might talk with a lender in general terms without reviewing any credit report or documentation. In such a case, a lender would consider that you have been prequalified versus preapproved. Without actually looking at the documentation necessary to approve your loan, the lender cannot say with any certainty that you have been preapproved.
What is Preapproval?
To get preapproved to finance a Minnesota home, your lender will need to obtain your credit report and review it to see if it will meet the standards of the loan program you are considering. They will also want to look at documentation which will verify the details they collect from you during the loan application. By doing so, they can discover if they will be able to finance your home after you come to an agreement with a home seller.
If you are meeting with a lender to discuss a preapproval loan application, you will want to collect some financial documentation ahead of time. While documentation varies from program to program, the following is a basic list required by many programs:
- Paystubs from each current employer covering the most recent 30 day period.
- W2 statements for each employer that you’ve had over the last 2 years.
- Bank statements from the last 2 months.
- Federal tax returns from the last 2 years if you are self-employed or have variable income necessary to qualify.
When you meet with your lender they may very well ask you for further documentation depending upon your financial situation. For example, if you owe child support they may request a copy of the court decree which shows the amount that you owe.
When you collect and provide any sort of documentation for a preapproval, be sure that you provide complete and legible statements. This is true of any document used in the mortgage process. If you bring a bank statement, for example, be sure to provide all numbered pages, even if some of the pages seem irrelevant. When a lender reviews a financial document they must look at all pages of the document.
How long does it take to get preapproved?
The length of time that it takes to get preapproved for home financing in Minnesota will largely very on the complexity of your financial situation. While some preapproval applications can be approved within an hour or so, others might need to go through a full underwriting process which could take up to 7-10 days depending upon the lender.
If you are planning on making a home purchase in Minnesota any time in the next 6 months, it is a good idea to talk with your lender today about getting preapproved. By getting the work done early you can help avoid any significant problems later down the line and can begin shopping with confidence.
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