We Received Our New Home Mortgage Pre-Approval Letter

Seal of Approval - Mortgage Pre-Approvel LetterJust yesterday I received the exciting news that we’re finally pre-approved for a new home purchase.

After a little bump in the road with the guys at Quicken Loans (who did a great job with our refinance), I was able to escalate my case and received an almost instant approval for a new home loan.

They were satisfied with the income showing on our two years of self-employed tax returns, our credit scores, our proposed down-payment of 20%, and our current savings and debt levels.

Be clear about what you want from the lender. Make sure you are getting an actual mortgage pre-approval letter vs a pre-qualification, which doesn’t carry as much weight.

Importance of a Mortgage Pre-Approval Letter

I now have a pre-approval letter in hand. This letter is evidence that a lender is prepared to work with me and it gives all parties involved in the pre-sales process confidence that we’re ready to move forward.

Before you search for a new home it’s wise to go after a pre-approval letter. Your real estate agent might even require you to have one before dealing with you.

Same goes for the selling party. They may not consider offers from people without a pre-approval letter. Or they may be willing to work with someone with a pre-approval letter even though they came in with a lower bid.

Our pre-approval letter is good for 90 days. It’s also subject to a full, formal underwriting review once we get a home under sales contract. So, we’re not completely out of the water but from my understanding it’s the best foot forward at this point other than having 100% cash.

I was surprised they didn’t need me to have a rental contract on our current place to get the letter. The fine print on the letter states that they might require that. But verbally, the lender told me I didn’t need it.

Increase Your Chances of Pre-Approval

We weren’t in the best financial shape possible, but we made some moves over the last year that helped our chances of getting this pre-approval letter.

To increase your chances of pre-approval: save up a big down payment, improve your credit score (check your score now), and improve your debt-to-income ratio by paying down debt, refinancing debt, and increasing your income.

I should also mention that because I’m self-employed, I don’t have a W-2 or paycheck to show the lender. They needed to see two years of tax returns as evidence of my business’s ability to support us.

Further, some people choose to pay themselves a big salary from their business. These folks seems to have an easier job getting past the underwriters to get a loan. If you are self-employed, consider setting yourself up on a salary and receive a W-2.

Our Next Steps

We can now start the process of searching for the right home, as well as preparing our current place to rent out.

It feels a little weird to be excited about being able to go into a massive amount of debt though. But this is definitely a part of our life plan:

I’m really looking forward to this move. In part because it will be a better fit for our family. A single family home neighborhood comes with schools and parks within walking distance, also a yard. Call me crazy, but I’m so ready to mow some grass.

Have any tips about home mortgage pre-approval?

Last Edited: June 23, 2016 @ 4:23 pmThe content of ptmoney.com is for general information purposes only and does not constitute professional advice. Visitors to ptmoney.com should not act upon the content or information without first seeking appropriate professional advice. In accordance with the latest FTC guidelines, we declare that we have a financial relationship with every company mentioned on this site.
About Philip Taylor

Philip Taylor, aka "PT", is a CPA, financial writer, FinCon CEO, and husband and father of three. He created PT Money back in 2007 to share his thoughts on money and to meet others passionate about managing their finances. All the content on this blog is original, and created or edited by PT. Read more about Philip Taylor, and be sure to connect with him on Twitter, Facebook, or view the Philip Taylor+ Google profile.

Comments

  1. I’m right there with you Phil, we’re currently thinking about renting out our home and buying a new house for our growing family.  We’re saving up that down payment right now and biding our time while we search for lots to build a house on (using my in-laws to build).  Part of the reason we’re thinking about renting is that the value of our current house has dropped so much, and it might be tough to resell right now and recoup any of our money.    Renting it out we can bide our time and build up some value in that home.  We’re hesitant to become landlords, but hearing some good experiences that our friends have had renting out their old home, we’re considering it.

    •  @moneymatters In a way, our hands are tied by the home value too. We’d lose 10k in equity from what I’m seeing. I think you and I both bought at the peak? Rents are solid here and should be for sometime from what I hear. Worse case scenario we sell it, take the loss, and move on.

      •  @Philip Taylor Yeah, we bought in August 2006, right around the peak.  We paid 273k for our house back then with 63k down.  It’s currently worth closer to 200k.  So a 73k hit on the value, and our down payment just went “poof”.  *sigh. On the bright side, we also sold our townhouse at the peak netting a 60k gain.  I guess it all evens out.

  2. I’m glad to here that it worked out after you made a stink.  I tried using Quicken Loans this past week to get pre-approved to make an offer, but their turn-around time to even take my call was two days.  In that time, I got AimLoans to get me a pre-approval on their website in about 20 minutes.  It worked out well and I was able to submit my offer this past weekend!

  3. That is so exciting!  Congrats!

  4. That is so exciting!  Congrats!

  5. debtblackhole says:

    You WANT to mow grass? Yep- CRAZY!
     
    Have FUN with the home search…always my favorite part!

  6. I got my pre-approval through Chase and all it took was a phone call, and they had emailed me the letter within an hour.
    Don’t forget – you can still get your mortgage through a completely different mortgage company, even if you made your offer with the Quicken Loans pre-approval in hand.

  7. Congrats on your new home! I have yet to check out this home loan company. I am familiar with http://www.writealoan.net/zip.jsp for home loan pre approval in North Georgia. I love the idea of being able to apply online. Where are you looking to buy?