How To Get A Pre Approved Mortgage – 3 Small Steps to Big Money Goals Quiz: Are You Ready to Buy Your First Home? What is your money mentality?
Getting pre-approved for a mortgage from a lender is essential when you’re ready to buy a home. It helps you determine how much home you can afford and shows real estate agents and sellers that you’re a serious contender. Learn how to get pre-approved for a mortgage – it’s easier than you think!
How To Get A Pre Approved Mortgage
A mortgage pre-approval is a preliminary assessment of a borrower’s financial situation by a lender to determine whether the borrower qualifies for a loan. When applying for pre-approval, the lender will review your assets, income, debt level and more. Getting pre-approved for a mortgage should be the definitive first step in your home buying process.
Mortgage Pre Approval: What You Need To Know
If you’re in the market for a new home, it’s best to get pre-approved for a mortgage before you start your search. Why so soon? Because it will tell you how much home you can afford, it will show potential sellers and real estate agents that you are serious about buying, and it will allow you to discuss loan options and mortgage budgeting with your lender.
Fortunately, getting your pre-approval is a simple and straightforward process. Below, we’ve highlighted the differences between a pre-qualification and pre-approval and outlined the steps you should take to get pre-approved before buying a new home.
Mortgage pre-approval and pre-qualification are letters that indicate that the lender has agreed to extend a loan to the borrower, but there is an important distinction between the two. Pre-qualification is simpler and provides only a financial picture of the borrower (how much the loan will be estimated to be). Pre-approval, on the other hand, involves a formal and thorough financial review of the borrower.
Use the home buying calculator below to find out how much home you can afford for your desired monthly payment. Remember that most home loans have terms of 15 or 30 years.
Pre Qualified Vs Pre Approved
If you’re in the market for a new home, you’re probably browsing real estate listings and checking out open houses. But make sure you run the numbers with your lender before you run out and find the perfect gang. Having a pre-approval in hand can mean the difference between getting your dream home and being caught by someone else who has the paperwork in order before you shop.
Getting pre-approved for a mortgage is a crucial part of the home buying process, but it doesn’t have to be difficult. Follow the steps above to get your pre-approval
You start your search and you’ll be planning furniture designs and choosing paint colors in no time!
Mortgage loans are offered by Define Mortgage Solutions, LLC, NMLS ID #1761612, a subsidiary of Desert Financial Credit Union. BK#0949053
Home Loan Pre Approval
The material presented here is for educational purposes only and is not to be used as financial, investment or legal advice. As you search for a home, getting pre-approved for a mortgage can be an important step to take. Consulting with a lender and obtaining a pre-approval letter allows you to explore loan options and budgets with the lender; this step can help you figure out your total house hunting budget and the monthly payment you can afford.
As a borrower, it’s important to know what a mortgage pre-approval does (and doesn’t) and how to increase your chances.
Think of mortgage pre-approval as a physical examination of your finances. Lenders are likely to look into every corner of your financial life as a way to make sure you pay back your mortgage.
You’ve probably heard the term “pre-qualification” used interchangeably with pre-approval, but they’re not the same. With pre-qualification, you provide a mortgage lender with an overview of your finances, income and debt. The mortgage lender gives you an estimated loan amount.
The Power Of Mortgage Pre Approval [infographic]
In this way, a mortgage pre-qualification can be useful in estimating how much you can afford to spend on a home. However, the lender does not pull your credit reports or verify your financial information. Accordingly, pre-qualification is a helpful starting point for determining what you can afford, but it carries no weight when you make offers.
On the other hand, pre-approval involves filling out a mortgage application and providing your Social Security number for the lender to run a tough credit check. A tough credit check is triggered when you apply for a mortgage. For this process, a lender pulls your credit report and credit score to assess your creditworthiness before deciding to lend you money. These checks are recorded on your credit report and can affect your credit score.
In contrast, a soft credit check occurs when you pull your credit yourself, or when a credit card company or lender accepts an offer without asking for it. Soft credit checks do not affect your credit score.
You will also list all of your bank account information, assets, debts, income, work history, past addresses, and other critical details for a lender to verify. The reason for this is that a lender primarily wants to make sure that you can repay your loan. Lenders also use the information you provide to calculate your DTI ratio and LTV ratio, which are vital factors in determining the ideal interest rate and loan type.
What Should A Mortgage Pre Approval Letter Contain And More
All of this makes pre-acceptance far more valuable than pre-qualification. This means that the lender has checked your credit and checked your documentation to approve a specific loan amount. Final loan approval occurs when you complete the appraisal and the loan is applied to a property.
Mortgage pre-approval letters are usually valid for 60 to 90 days. Lenders put an expiration date on these letters because your finances and credit profile can change. When your pre-approval ends, you’ll need to fill out a new mortgage application and submit updated paperwork to get another one.
If you’re thinking about buying a home and suspect you may have some difficulty getting a mortgage, going through the pre-approval process will help you identify credit issues and give you time to address them.
Seeking pre-approval six months to a year before a serious home search puts you in a stronger position to improve your overall credit profile. Plus, you’ll have more time to save money for your down payment and closing costs.
Things You Need To Get Pre Approved For A Mortgage Fast
When you’re ready to make offers, sellers often want to see a mortgage pre-approval and, in some cases, proof of funds to show you’re a serious buyer. In many hot housing markets, sellers have an advantage because of strong buyer demand and a limited number of homes for sale; you may be less likely to consider offers without a pre-acceptance letter.
Applying for a mortgage can be exciting, nerve-racking and confusing. Some online lenders can get you approved within hours, while other lenders can take several days. The timeline depends on the lender and the complexity of your finances.
To begin, you will fill out a mortgage application. You’ll enter your identifying information, including your Social Security number, so the lender can pull your credit. Although mortgage credit checks are considered hard inquiries on your credit reports and can affect your credit score, if you shop with more than one lender in a short period of time (typically 45 days for the newest FICO scoring models), combined credit checks are are counted single query
Here is a sample of a uniform mortgage application. If you’re applying with a spouse or another borrower, both applicants will need to list financial and employment information to qualify for the mortgage. There are eight main sections of the mortgage application.
Understanding Mortgage Pre Qualification Vs Pre Approval
The specific loan product you are applying for; loan amount; conditions such as the loan repayment time (repayment) and interest rate.
Address; legal description of the property; year built; whether the loan is for purchase, refinancing or new construction; and the intended type of residence: primary, secondary or investment.
Your identifying information, including name, date of birth, Social Security number, years of schooling, marital status, number of dependents, and address history.
Name and contact information of current and previous employers (you have been in your current position for less than two years), dates of employment, job title and monthly income.
What Is A Mortgage Pre Approval
A list of your basic monthly income, including overtime, bonuses, commissions, net rental income (if applicable), dividends or interest, and other monthly income, such as child support or alimony.
You’ll also need an accounting of your combined monthly housing expenses, including rent or mortgage payments, homeowner’s and mortgage insurance, property taxes, and homeowner association dues.
A list of all bank and credit union checking and savings accounts with balance amounts, as well as life insurance, stocks, bonds, retirement savings and mutual fund accounts and their corresponding values. You need bank statements and investment account statements to prove you have the funds for the down payment and closing costs, in addition to cash reserves.
You should also list all liabilities, including revolving charge accounts,
Tips For Getting A Preapproved Mortgage
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