When looking to purchase a house, the mortgage preapproval process is an essential step. It provides you with an accurate assessment of how much you can afford and indicates to real estate agents and potential homeowners that you are serious about purchasing the property.
The mortgage preapproval process involves a lender reviewing all aspects of your financial picture, such as credit and income. They will also require documents like bank statements, tax returns and pay stubs for verification.
It’s essential to get all of these documents in order, as lenders won’t approve a loan based on incomplete paperwork.
You can usually get preapproved online, by phone or in person. The process may differ slightly between lenders, but typically involves a brief loan application and credit check.
Getting Preapproved
The preapproval process helps you secure your borrowing power and give yourself an edge in a competitive housing market. It also uncovers any relevant issues that need fixing before beginning the homebuying journey, such as having low credit score or debt-to-income ratio.
Your lender will send you a letter outlining the amount you are eligible for and an interest rate based on an assessment of your credit and financial situation. With this info, you can search for homes within your price range and negotiate offers with home sellers.
A mortgage pre-approval can make a big difference when searching for your dream home, as it makes the process of making an offer much smoother. Furthermore, having this document on hand may encourage sellers to accept your offer more quickly.
It’s also an invaluable tool to assist in deciding the size of home to purchase. A lender typically provides an estimate of the total cost of buying a house, including closing costs and mortgage payments.
You may be preapproved for more than the home you want to buy, but it’s wise to speak with your lender to learn why they issued you such a low number. Doing this will enable you to adjust your expectations regarding how much a house will cost and avoid falling in love with a property that exceeds your budget.
Mortgage pre-approval letters typically have an expiration date, so it’s wise to get them ahead of time when house hunting. On average, these letters last 30 to 90 days depending on the lender; however, this timeline may differ for some.
Rejections Aren’t Final
Receiving a rejection letter for your mortgage application can be discouraging, but you still have the potential to become a successful homeowner. Use it as motivation to improve your credit or save up money for a larger down payment.
Your mortgage pre-approval letter is only conditional, so it doesn’t lock you into anything. You have the freedom to switch lenders before taking out a loan; however, in order to receive another preapproval letter, new paperwork and credit verification will need to be submitted.
It’s essential to be aware that a mortgage pre-approval does not guarantee you will qualify. Your application could still be declined for reasons outside your control, such as having a lower credit score or higher debt-to-income ratio.
