If you’re thinking about buying a home, you’re probably also thinking about being pre-approved for a mortgage. We want to tell you about a stronger strategy: being pre-underwritten. Pre-underwriting is the most certain type of pre-approval.
What is pre-underwriting?
Put simply, pre-underwriting is the only reliable answer to a big question: How much can I spend on a home? It’s a written commitment from a mortgage lender confirming the loan amount and program you’re qualified for.
Not only does pre-underwriting give you certainty about how much you can offer on a home, it makes you a more competitive buyer and it might even get you the home you want for a lower price.
All home loans involve underwriting, but typically not until there’s a specific property to consider. With pre-underwriting, the lender carefully reviews your ability to pay back the loan before a property is involved. Once you’ve found a home, the property title and appraisal will be underwritten.
The process of being pre-underwritten starts with you giving a loan officer documents pertaining to your credit, assets, and debt-to-income ratio. The loan officer shares the information with an underwriter, who carries out pre-underwriting.
Why pre-underwriting matters
Shop with confidence. Once you know exactly how much you can afford, you’ll avoid getting your heart set on a home that’s not quite in reach. Even better, you’ll enjoy the excitement of touring a home knowing it can realistically be yours.
Make your offer stronger. Pre-underwriting is as close as it’s possible to get to a guarantee that your loan will go through. In a multiple offer situation, this certainty can make you the winner. If there are no other offers on the table, giving the seller this level of confidence may mean they’ll accept less for the home.
Smoother closing process. Pre-underwriting takes you halfway through your loan approval process (leaving only the parts pertaining to the property). So, when you do find a home, the rest is a breeze. This simplification is good news for you and for the seller—a quick close is another way to make your offer stronger.
Avoid surprises. When you’re underwritten well ahead of offering on a home, any surprises that pop up related to your qualifications can be resolved before you’re in a sticky situation.
How is this different than pre-qualifying?
A pre-qualification tells you roughly how much you can afford based on what you report about your down payment, assets, credit, and income. It involves assumptions and is only a guesstimate.
So why isn’t everyone getting pre-underwritten?
There are a few common reasons most homebuyers don’t seek pre-underwriting: They don’t know about it, it seems like a hassle, or their lender doesn’t offer it.
You have to get your ducks in a row to hand over financial documents before being pre-underwritten. Remember, though: you’re going to have to do that work anyway if you intend to get a loan. With pre-underwriting, you’re simply doing it sooner in the process.
On the lender’s side, pre-underwriting means doing work without a guarantee that the borrower will end up finding a home or choosing to work with that lender. For this reason, some lenders opt not to offer pre-underwriting or to charge for it.
Flyhomes Mortgage has advisors dedicated to walking clients through every step of the mortgage process. No commitment is required and no fees are charged to get started on pre-underwriting.
Ideally, pre-underwriting happens before you start touring homes.
You’ll start by gathering the documents on this list and filling out an application.
- 2 years of federal tax returns
- 2 years of W-2s for all applicants
- 2 most recent pay stubs for all applicants
- 2 months of bank statements for all accounts that will be used for your down payment
- Current mortgage statement for properties you currently own (if applicable)
- Copy of current visa and/or EAD card (if you are a non-permanent resident)
About Flyhomes Mortgage
Our streamlined process helps you maximize your homebuying budget, secure guaranteed funds, and close on your new home in days instead of months.