In today’s competitive market, before you go house hunting, it is always better to be ‘armed.’ House hunting before getting pre-approved for a loan is like riding a car without wheels. How much money you can spend on a home, how much loan you’ll be able to obtain? You should be able to have answers to these questions before you start house hunting. Getting pre-approval is a sure way to know that.
What is a pre-approval?
A pre-approval can give you a leg up in the buying process because it means that a lender or bank has determined that you are a suitable candidate for a mortgage. The lender has checked your credit history, your income, tax returns, and whether you have funds for a down payment and closing costs. The lender or the bank will determine exactly how much you can borrow.
Do you need a pre-approval?
There are several reasons why you need a pre-approval. First, you will know how much the bank is willing to lend you giving you an idea on what will be your price range when you go house hunting. Also having a pre-approval means you are a serious buyer, it can give you an edge on the competition when you need to bid on a property. Some sellers won’t accept offers without a pre-approval.
How do you get a pre-approval?
First, you’ll need to go to a lender or bank. Try to talk to a few lenders and look out for loans that will best suit your financial situation. Complete a mortgage application of your preferred lender. You will need to provide your name, addresses for two years, birth date, social security number and work history for the last two years.
The loan office will look into your income, your employment situation, any debts you may have and if you have funds for your down payment. You will be asked to provide your tax returns, income documents, and bank statements. The lender will thoroughly investigate your finances.
Pre-approval vs Pre-qualified
Many people mistake that pre-qualified is the same as pre-approved. It is not. Pre-qualified is only a basic overview of your ability to get a loan, it is not in-depth and you only supply the lender information about your income, debts, assets. There’s no paperwork to back it up. Pre-approved is more reliable because it requires more up-front documentation from you. However, having pre-approval doesn’t guarantee you a loan but it will help speed up the underwriting and mortgage approval process.
Free Mortgage Guide
If you are buying a home or anyone you know who is thinking of buying a home, use this Home Loan Toolkit to help you understand and help you get the best mortgage specific for your situation. This guide will also help you understand the mortgage process and overview of the total costs of homeownership.