For many people, real estate is not only a critical component of their investment portfolio but also includes the place they call home.
For most [of us], securing a residential mortgage may be the key to making it happen. Whether it’s your primary residence, a second home, or another type of property, choosing a lending source that’s appropriate for your goals and longer term financial strategy can be critical.
A Conditional Preapproval
Buyers who wish to be more fully prepared may seek conditional preapproval for financing before they begin their real estate search. In competitive housing markets, securing preapproval for a loan may be common practice for participating in the home buying process.
This may be a critical step that not only gives house hunters a clear idea of their budget, but it also may potentially provide an advantage in a competitive bidding environment against those who haven’t been preapproved. When assessing bids, a conditional preapproval may signify that a buyer is firmly committed and has a lender lined up—all positive attributes from a seller’s perspective.
The Conditional Preapproval Process and What May Be Required
Once you’ve contacted your Financial Advisor or lender, applying for a mortgage preapproval—which is typically free—may include these steps. Please note that the processes and standards for determining whether or not to grant a mortgage pre-approval letter varies by lender.
- Complete preapproval application
- Provide the necessary income and asset information. While requirements vary by lender, they may include:
- Social security number in order to obtain credit reports.
- Documentation and verification of income, such as W-2s, pay stubs, and income tax returns for the past two years. Self-employed borrowers may need to provide additional paperwork.
- Documentation and verification of assets, such as bank and investment statements./li>
- If any funds for the down payment will be coming from family or friends, you may need to include a gift letter to prove that source isn’t a loan.
- Based on an evaluation of the documentation, the lender will then provide you with a conditional letter of preapproval specifying a loan amount, which can be included in the property application packet.
Please note that the processes and standards for determining whether or not to grant a mortgage pre-approval letter varies by lender.
If you obtain a conditional preapproval letter, you may proceed with the process of finding a property, making an offer and finalizing your financing with your lender.
While a conditional preapproval is not a guarantee of a loan, it may help provide information that indicates borrowing limits and home affordability.
For general reference and educational purposes only. The information provided herein is not intended to address any particular matter and may not apply depending on the context, as all applicants’ circumstances are unique. No legal or other advice is being offered herein.
Residential mortgage loans/home equity lines of credit are offered by Morgan Stanley Private Bank, National Association, an affiliate of Morgan Stanley Smith Barney LLC. With the exception of the pledged-asset feature, an investment relationship with Morgan Stanley Smith Barney LLC does not have to be established or maintained to obtain the residential mortgage products offered by Morgan Stanley Private Bank, National Association. All residential mortgage loans/home equity lines of credit are subject to the underwriting standards and independent approval of Morgan Stanley Private Bank, National Association. Rates, terms, and programs are subject to change without notice. Residential mortgage loans/home equity lines of credit may not be available in all states; not available in Guam, Puerto Rico and the U.S. Virgin Islands. Other restrictions may apply. The information contained herein should not be construed as a commitment to lend. Morgan Stanley Private Bank, National Association is an Equal Housing Lender and Member FDIC that is primarily regulated by the Office of the Comptroller of the Currency. Nationwide Mortgage Licensing System Unique Identifier #663185. The proceeds from a residential mortgage loan (including draws and advances from a home equity line of credit) are not permitted to be used to purchase, trade, or carry eligible margin stock; repay margin debt that was used to purchase, trade, or carry margin stock; or to make payments on any amounts owed under the note, loan agreement, or loan security agreement; and cannot be deposited into a Morgan Stanley Smith Barney LLC or other brokerage account.
A preapproval letter, which is subject to conditions, is not a commitment to lend.
Morgan Stanley Smith Barney LLC is a registered Broker/Dealer and not a bank. Where appropriate, Morgan Stanley Smith Barney LLC has entered into arrangements with banks and other third parties to assist in offering certain banking related products and services.
Investment, insurance and annuity products offered through Morgan Stanley Smith Barney LLC are: NOT FDIC INSURED | MAY LOSE VALUE | NOT BANK GUARANTEED | NOT A BANK DEPOSIT | NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
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