Need To Get Pre Approved For A Mortgage Loan? Here’s How!
By getting a pre approved mortgage, you create the best possible shot to buy a home. By giving you this pre-approval, the lender is ensuring to the seller that are creditworthy. They are saying that you have the opportunity to borrow money at a fixed interest rate. This promise allows sellers to see your trustworthiness, and you’ll be more likely to end up with the home you want.
During this process, a lender will go through your credit and income with a fine-toothed comb. They will verify your income, as well study your different credit lines. If approved, the lender will present the buyer with a pre-approval letter. This states that once an offer for purchase has been submitted with the correct documentation (the purchase contract, preliminary title information, appraisal, and your income and asset documentation), the loan will be approved. With that said, the pre-approval is not 100% and is only valid for 2 to 3 months after it is received, though this often varies.
What Is ‘Pre-Approval’?
When a lender gives you pre-approval, this means they are sure of your ability to not only make the original down payment but also to cover the mortgage payments that will begin after the purchase of the house. After the letter is issued, the value of the property needs to be determined. It must be sufficient collateral for the loan. This means the property’s appraisal value must be equal to or higher than the loan amount.
Starting The Pre-Approval Process
When you decide you want to try to get pre-approved for a home loan, you need to check your credit score as well as your credit reports. By doing this at the beginning of the process, you have a better understanding of the possible loans you may qualify for. This also allows you more time to amend the documents and fix any errors that are in the reports.
What Else Do You Need To Be Pre Approved?
While it seems daunting, this process is actually quite simple. That is, as long as you supply all of the necessary documents to your lender. These documents include:
- Your Income Information: This means that you will need to provide pay stubs, tax returns (including W-2’s from the previous two years), and any documents on additional sources of income (VA benefits, Retirement, Alimony, etc.).
- Documents on Your Assets: On top of your basic income, the lender will want information on any other assets you have. This could include bank statements, investment reports, and any other possible assets that could show your ability to pay back the loan in the future.
- The Proper Personal Information: You will need to bring a federal ID (a driver’s license or passport) as well as your social security card to run a credit check and see your credit score. Your lender will be able to access your credit information, so don’t worry about bringing a copy of that as well.
At this point, pre-approval can typically take two to four weeks to process. However, it can take just one day. With these steps, you can attempt to become pre approved with multiple lenders as long as it’s within one 45-day period. As long as you stay within that period, only one inquiry will show up on your credit report.
Why Is Pre-Approval Important To Getting A Mortgage?
Once you have chosen a property, you will need to show your pre-approval letter to the seller. This will show how serious you are about the purchase. It will also prove that you will be able to complete the purchase.
Being pre approved means that a lender has inspected your credit reports, income, and employment history carefully. They have determined which programs you would qualify for. They will also determine how much you can borrow and what interest rate you could be offered.
Being able to get pre approved for a loan is incredibly important in the home buying process. People may trust you and your word, but having that letter and that documentation increases your appeal incredibly.
By following this process, you become one step closer to your dream home. Give us a call with any questions you may have concerning the pre-approval process. We’d be happy to help.