Homeownership is rewarding, but the home-buying process can be complicated and stressful. It may be the largest purchase you will ever have to make. And South Carolina home loans come in a lot of different flavors. Of all the things you can do to prepare, getting pre-approval for a mortgage is one of the wisest places to start.
There are many good reasons to buy a home instead of rent. Certainly there’s the pride of ownership. But there are tax benefits to homeownership as well (such as deductions for mortgage interest and property tax). You get equity in a home you own, but not in one you rent. And by and large, houses are cheaper to buy than to rent. According to the Joint Center for Housing Studies at Harvard University, 82% of available homes are affordable for the median owner, while only 42% of rentals are affordable to renters.
All the more reason to do your homework. As gratifying as homeownership can be, and unique as our state is, South Carolina is not immune to forces in the national real estate market. Here in 2022, the current conditions are what’s known as a seller’s market, meaning that there is more demand than there are houses, so sellers can command higher prices. The competition for every house demands that you as the buyer be ready to act fast when you find a home you love. And we mean fast—being prepared to make an offer on the spot very often means the difference between success and disappointment.
If you get pre-approved for a South Carolina home loan, you’ll be steps ahead of the competition. You’ll be armed with the knowledge of precisely how much home you can afford, and—perhaps more importantly—you’ll have proof that you can show to the seller that a trusted financial institution is ready to back your play.
What does mortgage pre-approval mean?
Mortgage pre-approval simply means that “a lender has guaranteed to give you a home loan” (Realtor.com). Having that guarantee when looking at homes tells a seller—and their agent—that you are a serious buyer who is ready to act.
With pre-approval, you haven’t taken out a loan yet. You’re essentially telling your bank that you want a South Carolina home loan, and want to know how much they can promise to give you.
Knowing that dollar amount in turn helps you figure out how much of a home you can afford. And it may be helpful to note that it doesn’t ruin your bargaining hand when looking at properties. Quite the opposite.
When shopping for homes, having that letter of pre-approval makes you as credible in the seller’s eyes as if the bank’s loan officer was standing by your side.
How long does mortgage pre-approval take?
It’s important to understand the distinction between getting pre-qualified for a South Carolina home loan and getting pre-approved. Pre-qualification is not a guarantee, but it is often very quick: it’s a conditional nod from a lender based on a few numbers that you yourself report.
Pre-approval requires that the bank check your credit and verify your income and assets before calculating and approving a loan amount.
Lenders will ask for a few days—sometimes more—since they need to make sure they have all the information they need from you, and it takes time to look through your documents. You can speed up this process by making sure you have all your appropriate documents together when you apply for pre-approval.
It’s very important not to rush the homebuying process. There is a time for acting quickly and aggressively, but it’s not during this early phase. Buyers who hurry to get pre-approved before they have adequately prepared often find themselves with poorer options for financing and homes. It pays to take your time and make sure you’ve saved up as much as you can for a down payment and ensured your credit is good.
What documents do I need for mortgage pre-approval?
South Carolina home loans may come in different varieties, but the information needed for pre-approval is pretty universal. It essentially boils down to a list of income, assets, and debts.
Here’s what you’ll need:
- Down payment. Know how much cash you have available to use. This is critical. It doesn’t matter if you’ve saved the money yourself, inherited it, or are getting it as a gift or loan from a family or friend: you need to have a pretty solid idea of what you have. If you are receiving a gift, you’ll want to have a letter from your donor proving that it’s not expected to be paid back.
- Proof of income. For wage-earners you’ll need a copy of your last W-2 form and your most recent two paystubs. For contractors, business owners, and the self-employed, you’ll need a year-to-date profit and loss statement and two years of records, including 1099 forms. Any other documented income, such as rental properties, also needs to be reported.
- Rent history. If you are renting, you need to show proof of payment for the last 12 months, as well as contact information for landlords for the past two years.
- Assets. You’ll need 60 days’ worth of bank statements for every account you’re using to qualify for the loan. You’ll also need two months’ worth of statements from IRAs, investment accounts, or CDs, and if you have a 401(k) you’ll need the last quarterly statement which shows your vested balance.
- Debts. Have a list of ALL current payment obligations—this includes student loans, auto loans, mortgages, and credit cards—along with account numbers, balances, and minimum payment amounts. If you pay child support or alimony, be ready with those records, along with your divorce decree. And if you currently own a home that is mortgaged, you’ll need to include your most recent loan statement for that as well.
How long is my mortgage pre-approval valid?
Pre-approval for South Carolina home loans is generally good for 90 days (and sometimes only 60). After that, they expire and will need to be renewed if you are going to continue looking for a home with the intent of using the same lender. The good news is that renewal in South Carolina often requires a simple re-validation of your documents—although you’ll still need to furnish more recent paystubs and statements. So keep those pre-approval documents handy!
“The reason pre-approval letters ‘expire,’” according to Realtor.com, “is because banks need the most up-to-date information about your salary, assets, and debts. Three months is long enough that you could have left a job, taken on new debts, or spent what was previously in your bank account.”
When should I reach out to a Mortgage Loan Officer (MLO)?
The best time to get pre-approved for a mortgage is early in your home buying process. But it’s not the first thing you should do.
When anticipating buying a home and researching how to get pre-approval for a mortgage, many people make the mistake of reaching out to their bank before they have all their proverbial ducks in a row.
Before you apply for pre-approval, make sure your credit is as good as it can be under your circumstances. For many people, this means waiting months or even years to enter the market, so they can pay down debts and build a strong credit history.
Then, figure out how much cash you’ll have available for a down payment. Know how much you have in savings, and determine if you’ll have any contributions from gifts, investments, or anticipated windfalls. Again, knowing how much you have for a down payment is crucial to getting a South Carolina home loan.
Once you have these things, you’re ready to apply for mortgage pre-approval! Your next step is to reach out to a Mortgage Loan Officer or MLO at a local trusted lender like South Atlantic Bank. To get pre-qualified or talk to a lender, visit southatlantic.bank/mortgage-loans/meet-our-team.