How Does The Mortgage Preapproval Process Work?
Are you thinking about purchasing a new home within the next few months? If so, you’ll want to know about the mortgage preapproval process before you start shopping around. Typically, you’ll want to get preapproved for a mortgage around the same time you start seriously looking at properties. This is because the preapproval typically expires after three months. In this article, we’ll explain why you need to get preapproved and how you can start the process.
Getting preapproved for a mortgage means a lender has looked at your financial situation and decided that you ultimately would be approved for a mortgage. Going through the mortgage preapproval process lets realtors and sellers know you are a qualified homebuyer. When you’re trying to get preapproved, you can consult more than one lender, which will give you the chance to explore different lending programs and compare rates.
You Need To Get Prequalified
Before you can get preapproved, you’ll need to be prequalified. During the prequalification process, you’ll get interviewed by a mortgage professional. They will give you a general idea of what you can afford, so you can be an informed homebuyer. After the lender has looked closely at your credit reports, your employment history, and your income, you may get preapproved if the lender decides you are a good candidate for a mortgage. Once you’re preapproved, you’ll know the programs you can qualify for, the interest rates, and the maximum amount you’ll be able to borrow.
Benefits of a Mortgage Pre-Approval
- Gives both real estate agents and sellers a clearer idea of what you can actually afford.
- If there is a bidding war on the home, the person that holds that mortgage pre-approval will be the winner.
- The final mortgage approval will go quicker since most of the necessary paperwork is already in place and completed.
Your Credit Score Is Important
If you’re nervous about moving forward with the mortgage preapproval process, you’ll want to take a look at your credit score. This will give you clues about the types of loans and interest rates that would potentially be available to you. Not happy with your credit score? Now may be the time to move forward with credit repair and start cleaning up your credit report, so you can open yourself up to better options.
Get The Necessary Paperwork Together
You will need certain financial documents as a part of the mortgage preapproval process. You’ll need income information, asset information, and personal information. The lender will most likely want to see your pay stubs and W2 information from the past couple of years. If you have information about any of your investments, then you’ll want to bring documentation of those assets. Finally, you’ll want to bring a valid form of ID and your social security number.
Once you get your mortgage preapproval, your can start interviewing realtors. When you find the house of your dreams, the lender will approve both you and the property you intend to purchase. They will then issue a loan commitment and you will be that much closer to purchasing your dream home. Then you move into the next steps of purchasing a home which include home inspections, homeowners insurance, closing costs and more.