Why You Need Mortgage Preapproval Before You Start House-Hunting - Real Estate in Aspen, CO Homes for Sale & Properties

If you’re like most people buying a home for sale in Aspen, you’ve heard how important it is to get mortgage preapproval before you start house-hunting – but why?

Why You Need Mortgage Preapproval

When you want to buy a home, your first step is mortgage preapproval. When you have a preapproval letter, it serves two purposes. First, it tells you exactly how much house you can afford and gives you a price range to start looking in; second, it gives you the ability to make an offer quickly when you find a house you love.

Preapproval vs. Prequalification

Preapproval is different from prequalification. Preapproval requires you to submit documents that back up your claims about how much money you make, while prequalification is simply a letter from a lender that says, “If you make as much as you say you do, we’ll probably let you borrow the money.”

What You Need for Mortgage Preapproval

You’ll have to provide your lender with several documents for mortgage preapproval, including:

Tax returns from the past two years. Your lender wants to make sure your reported annual income is accurate.
Pay stubs. Your pay stubs will show your lender exactly how much you make in a month.
Bank statements. Lenders want to see how much money you have put away for mortgage payments, as well as to see if your down payment is in there.
Proof of other assets. If you’re using other assets to pay for your house, the bank will want to know about them.
Gift letters, if you have them. If you received money from family or friends for a down payment, your lender will probably want letters saying that it was a gift and not a loan.