How to Get Pre-Approved for a Mortgage
Before you have made an offer on a home, get the lenders to make their best offers to you for a mortgage pre-approval. Those closing documents are pretty exciting, but the other piece of paper that is exciting during your home buying journey is that pre-approval letter. With the pre-approval letter, you will know exactly what you can afford, and you will be able to quickly move when you find a good house that you like. It isn’t hard to get pre-approved for a mortgage, and it’s easier when you know what you can expect.
How to Get Pre-approved for a Mortgage
Understand the Difference between Pre-approval and Pre-qualification
Getting pre-approved for a mortgage will make getting a mortgage easier and it will put you in a better position. When you’re pre-qualified, it will not do any of those things, so make sure you do the right one. When it comes to pre-qualification, all you will be doing is giving a lender some details about your finances and you will get a general idea of the amount of money you may be able to get. Being pre-qualified is helpful when you’re planning, but that is about it.
The process that is available for getting pre-approved is more involved and takes a longer period of time. However, once you’re done, you’ll be walking away from the lender knowing the specific mortgage.
For pre-qualification, you give a lender a few details about your finances and you receive a general idea of what size mortgage you might be able to get. It’s helpful for planning and browsing, but that’s about it.
Get Your Financial Life in Good Shape
The size and terms of the mortgage you are pre-approved for is based on your credit. If you have some time before buying a home, there are some things you can do in order to get the best mortgage terms possible:
Income: How about a raise? Now is the time to ask.
Credit Score: Resolve any outstanding issues that are on your credit report.
· Debt: Pay down any credit cards, loans, or line of credit that you have.
· Savings: Make sure the lender is able to see that you have a down payment that is ready to go.
Research Loan Types and Mortgage Lenders
Go ahead and research different loan types and mortgage lenders. Different lenders may approve you for different loan terms, so it would be a good idea to shop around. A local credit union, your own bank, or a company that only offers mortgage loans will be able to offer different benefits. You should get pre-approved by three lenders so that you will be able to compare the terms, interest rates, and mortgage payments that are offered by each.
Look into the different types of mortgage loans that you may be able to get. This includes adjustable rate, fixed-rate, VA, FHA, and so on. Lenders will be able to help you figure out which one is best for you.
Make Sure the Timing is Right
Understand that pre-approval letters do expire. Often times, you will have 60 to 90 days once you are pre-approved. Before you start the application process, it is important to make sure you aren’t jumping in too early. Find a good real estate agents and make sure you’re ready to go so that you can start hunting for a home as soon as you are pre-approved. Of course, if you have to reapply, it’s not the end of the world, but avoiding having to reapply can save you some time.
Gather Your Financial Documents
Your lenders will want to see how your financial life has been, and they will want documents as proof. It can take a couple of days to get these together, so the more documents you have on hand when you apply, the more time you will save. The documents you need will depend on the applicant. For example, if you’re a veteran going for a VA loan, you will require different documents from someone that is self-employed. Here are the basics that are required:
· Proof of employment
· List of liabilities, such as child support or loans
· Drivers license or passport
· List of assets, such as retirement accounts, checking accounts, and so on
· Previous bank statements from the past two months
· Any legal declarations such as liens, bankruptcies, divorce decrees, and so on
· Previous paystubs
· Gift letters explaining monetary gifts
· Previous tax returns from the past two years
Apply for Pre-Approval
Each lender is going to have forms and processes that are slightly different, but that’s nothing to worry about. Just make sure you follow the directions and once you have all of the proper documents submitted, you should hear back from the lender within 24-48 hours. If you are pre-approved, then that is good news, but remember it will expire, so it is time to start your journey on buying a home.
Avoid Financial Changes
During your home buying journey, avoid big financial changes. Your financial life should remain stable because you haven’t secured the actual mortgage yet – this will come after you make the offer and it has been accepted.
If nothing has changed, you should feel secure about your mortgage application being approved, and this means that you can finally move towards closing on your new home.
Now that you have made the first steps in your home-buying journey, it is now a good time to get started.