A mortgage pre-approval is a huge advantage in a fiercely competitive market — and that’s especially true in San Francisco. The Golden Gate city continues to grab headlines as one of the most competitive housing markets in the nation. Due to the high purchase prices, many Bay Area buyers require jumbo loan financing, and getting pre-approved for a jumbo mortgage is an important aspect of the process. In this article we share some tips to begin the pre-approval process in San Francisco – or anywhere else in California.
Pre-Approval – The Basics
- Pre-approval for a mortgage means that the lender has reviewed a person’s financial documents and other relevant information, and has provided an estimate of how much money may potentially be borrowed.
- Here’s a general example: If you are shopping for homes in the $850,000 to $900,000 price range, and have already set aside $250,000 to apply to the down payment, then you would want to request pre-approval from your lender for the remaining $650,000 to match your planned max offer price.
- Once you have been pre-approved, the lender will typically provide you with a letter you can share with real estate agents and home sellers. The letter explains that, after a preliminary review, it has been determined that you would qualify for a mortgage of a specific amount. Usually these pre-approval letters or documents are valid for about 30 days, but can be updated as needed.
- Remember that if you have been pre-approved, you have no obligation to take out a loan. Similarly, the lender reserves the right to ask for more documentation prior to actually funding your mortgage. Your mortgage banker will inform you of all necessary steps.
The Advantages of Being Pre-Approved
You are not bound in any way by a pre-approval, but it is simply intended to give you a very informed idea of how much you can borrow. That is reassuring to buyers, home sellers, and their real estate brokers. Pre-approval is especially useful in highly competitive markets, where sellers are more inclined to have a favorable view of a purchase offer from a pre-approved buyer. For that reason, pre-approved buyers may enjoy a distinct advantage when competing against buyers who have not yet been pre-approved.
Why are pre-approvals important in the San Francisco market?
It’s simple. The market in the Bay Area is really competitive. The SFGate talks about this here, and here. Whatever you can do to show your ability to get the financing you need will only benefit your situation. A pre-approval means that the lender has already looked at your income and assets. While it’s not an official loan approval, it still indicates to the seller that you are serious about making the offer and are prepared to go through the loan process. In summary, a pre-approval letter will highlight a strong buyer, which home sellers appreciate as it saves them valuable time when considering multiple offers.
What Documents are Typically Required?
Here are the documents someone seeking a pre-approval would typically provide for review:
- Most recent two years personal federal tax returns.
- Most recent two years W-2s.
- Two most recent, consecutive pay stubs.
- Two most recent monthly bank statements (checking, savings, CD, investment, retirement, etc.) to determine assets and available funds to close.
- Identification (such as a driver’s license).
- A signed borrower’s authorization form – required by law in order to check your credit history.
If you own more than 25% of a business from which you derive income, you may be asked to provide additional documentation.
What Happens Next, If My Offer is Accepted?
Congratulations, let’s move forward with your loan! First you will be asked to provide a copy of your purchase contract along with your real estate agent’s contact information. Then we will begin to process your loan for a fast closing!
It’s important to note that there are some documents that can only be submitted after you have an accepted offer, and other items that will need to be updated as it is reviewed in underwriting. Stay responsive to information requests from your mortgage banker and you’ll help keep the loan application going smoothly!
We Customize Your Pre-Approval Letter To Your Offer, On Your Schedule.
Are you ready to get started with pre-approval? Speak with our mortgage bankers today, and get the ball rolling. You can quickly and conveniently upload your documents, using the Carlyle Financial secure online portal. Once you are pre-approved and are actively looking for properties, we can customize your pre-approval letter with helpful details such as the address of the property you wish to purchase and the purchase offer price – even if you need it outside traditional business hours.
Are you just shopping around for now, and want to discuss your options? Reach out to our mortgage bankers, who are extremely knowledgeable in competitive California real estate markets, with whatever questions you may have. We are also happy to provide referrals from our resourceful real estate agent network.
If you find the home of your dreams and want to make an immediate offer, wouldn’t it be nice to have a pre-approval letter ready to go? Let us help you. Happy house hunting!