Shopping for a new car is fun and exciting. There’s a lot out there for you to choose from. If you are a serious buyer, you should start the process by visiting a lender’s office. Consulting with a lender will benefit a potential buyer in many ways, like getting a pre-approved loan. A lender can help buyers learn how much money they can borrow. This will give them an idea of what kind of car they will be able to afford.
What is the difference between pre-qualification and pre-approval?
A pre-qualification is a useful tool to get an estimate of how much you can borrow to buy a new vehicle. A pre-approval is more valuable as it means that your credit history and report have been checked. Your papers have been reviewed so that a lender can approve a specific amount of loan for you. A pre-approval usually lasts for about 90 days. The final approval of the loan will be when your appraisal is done and the loan is applied to the property you chose.
Here are the five things you will need to get a pre-approval loan:
Proof of Income
Getting pre-approved for a loan you will need to produce proof of your income. Prepare W-2 statements from the past two years, payslips for the past six months and proof of additional income. Also, include in your documents your most recent tax returns.
Proof of your Assets
To prove that you have the money to pay for the down payment and closing costs, you’ll have to provide bank statements and investment account statements. The down payment of loans can run as low as 3.5% up to 20% depending on the kind of loan you’re applying to. If a relative or friend is helping you pay the down payment, a gift letter should be provided as proof that it’s not a loan.
Good Credit History and Report
Having a good credit score will convince lenders to give you the lowest interest rate possible. If your credit is not excellent, you may have to pay more interest and a larger down payment. For example, an FHA loan will require those who have credit scores of 580 and below to pay more as a down payment. Usually, lenders will require a 620 or above in order to be approved for an FHA loan.
Certificate or Proof of Employment
Pay stubs won’t be enough for some lenders. They will also call your employer for verification of your employment. You can provide a certificate or a reference number so that there’ll be proof. Lenders are more inclined to make loans to borrowers who have a stable job. If you are self-employed, you’ll need to provide paperwork to verify your business and income.
The lender will have to copy your valid IDs such as a driver’s license or passport. They will also need your social security number and your signature to allow the lenders to check your credit report. During the pre-approval session, be prepared to provide any needed documents that your lender may request. The mortgage loan process will be smoother if borrowers are cooperative.
Once your documents are gathered, it’s time to find the best auto loan rates and apply for a loan. Don’t forget to consult a lender before you start looking at cars to save time and disappointment. Gather all the needed documents and get that pre-approved loan before car hunting. For more information about auto loans, please visit Carfect.