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Real estate agents recommend that buyers get preapproved for a mortgage before they start house hunting. A preapproval letter is a document from a lending institution that verifies an individual has the wherewithal to purchase a home. This paper makes a buyer’s offer stronger because it shows the seller they are ready to go, and a third party has vetted them.

A buyer should see a lender well before the home buying process to know how much they can comfortably afford or to identify any financial issues that will stop them from completing the deal. Some matters can be resolved quickly, but others may take months to clear from a record. Lenders generally provide applicants document checklists, and he or she will require you to release some financial statements directly to them.

Credit Report
A credit report will be pulled. This is vital information for the underwriters. If there are any negative items on the report, the lender may have some suggestions about how to remove them or clean them up. Do not close or open any accounts during this process because it will cause the number to fluctuate. Sometimes closing a long-standing account can reduce a score, as will opening any credit account. When being preapproved for a mortgage, it is not advisable to make any financial moves without first discussing how the transaction will affect the credit scores.

Paycheck Stubs and Employment Verification
The lender must verify employment and gross income. Paycheck stubs may suffice to begin the process, but eventually, all employers are contacted to verify employment. The income can come from non-traditional avenues also. That is where taxes come into play.

Two to Three Years of Tax Filings
This paperwork gives a detailed picture of long-term income and the sources. For self-employed individuals, this is an essential piece to prove income. Individuals should be caught up on tax filings. If they owe money to the IRS, they must either pay it back before buying the home or, in some cases, the individual can work out a compromise and repayment plan with the IRS than proceed.

Other Financial Statements
Bring statements that show all forms of savings and assets. Non-liquid assets, such as stocks, bonds, and mutual funds, add to the application’s overall health. Large amounts of cash in a bank account will need to be accounted for. If it was a gift, the person who gave the money might need to write a letter of explanation stating that the funds are a gift, and it is not a loan that needs to be repaid.

Identification
The names across the mortgage preapproval, application, and real estate contract need to be the same. It should match the names on the tax filings. Before signing any documents, check the spelling. If a name change occurs during the home buying process, like from a marriage, notify the loan officer and be prepared to present the original marriage certificate.