What is the necessary documentation I should have?

For salaried borrowers:

v Last 2 year's W2's
v Paystubs for past 1 month
v Statements for all significant asset accounts for the past 3 months
v Complete Federal tax returns for past 2 years if: you own rental, property or if more than 10% of your income is from commissions.

For self-employed borrowers:

v Complete Federal tax returns for past 2 years (this must include all pages) Be sure to include all K1's (partnerships) even if you did not include it with your return.
v Year-to-date Profit and loss statement
v Last 3 months statements for all significant asset accounts.

In either case if you own other residential real estate which you rent you may need to present lease agreements and a lender always needs your 1040's for the past 2 years.

If your tax returns are "on extension" you will need a copy of the request for extension.

If this is a purchase transaction you will need a fully executed copy (signed by both parties) of the sales contract.

What is prequalifying?

Prequalifying is a process whereby a loan officer takes information about you, either over the telephone or face-to-face and indicates how big a loan of a particular type you will qualify for. The lender would then give you a "prequalification letter" which is of considerable value in dealing with a Realtor or a potential seller. Realtors and sellers are interested in dealing with people whom they know to be able to get the loan necessary to close the deal. Most lenders prefer to get the income and asset information from you, get a loan application and prequalifying credit report and then write the letter.

What is preapproval?

Preapproval is a step beyond prequalifying. In a preapproval you are actually approved for an amount and for a certain type of loan. The preapproval is contingent you finding or making an offer on a property.

With a preapproval you can close the loan faster and often will find your offer more acceptable to the seller. Sometimes sellers are anxious and will take somewhat less in price from someone who can close quickly.

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