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What Do I Need For A Mortgage Pre Approval – After setting a budget and deciding which type of mortgage is right, homebuyers will want to follow some of these tips to make the application process go as smoothly as possible. The pre-approval letter you receive from a lender is not an official guarantee of a loan. Applying for a mortgage can be a long and difficult process to navigate, but understanding the options available to home buyers will help!
The mortgage rate isn’t fixed in the pre-approval letter, so make sure you’re aware of what could affect changes and avoid those you have control over at all costs (literally). Here are some things home buyers should be aware of when shopping for a mortgage loan.
What Do I Need For A Mortgage Pre Approval
Get to know the lenders! Before you sign off on any loans, make sure you do your home buyer’s homework (or due diligence) on the lenders. Some steps you should take to decide if a lender is right for you include:
The Power Of Mortgage Pre Approval [infographic]
If the lender has a high rate of denying applications, this is a bad sign. Those who are already on the verge of meeting typical requirements for a conventional loan may find it difficult to get a mortgage from a lender with a lower approval rate.
Getting quotes and taking out a loan today is quick and easy thanks to mobile apps that put options right at your fingertips. But don’t be too quick to pull the trigger. This is a big decision, and every first-time home buyer should take their time.
Ultimately, every home buyer should shop around for the best mortgage rate and be sure they are comfortable with the loan amount. Stick to your budget and don’t be persuaded to take on a more expensive house and bigger loan than you can afford under the expectation that property will always appreciate. While this is likely to happen, it is better to have a smaller mortgage that is manageable during good economic times and bad times than a large one that you could lose in a foreclosure.
After submitting your application to the lender of your choice, you will receive a pre-approval letter. This will document exactly how much mortgage you have been approved to borrow.
How To Apply For A Mortgage?
Even though the loan terms can change, they are an integral part of starting the home buying process. Only those who are ready to make an offer jump through this first hoop.
A pre-approval letter doesn’t lock you into a deal with a lender, but it’s a great way to set yourself apart from other home buyers. In addition to the pre-approval letter, you should also familiarize yourself with the loan estimate and the closing disclosure, which are important lender documents to help you track your closing costs. The infographic below explains how each fits into the process of getting a mortgage.
At this stage, you are not yet applying for an official loan. It is not a loan commitment and without a signature it is not a legally binding document.
Until an Underwriter receives documentation to confirm your income and issues the Loan Estimate also known as the Mortgage Commitment Letter, there is a possibility that the numbers in the pre-approval letter will change. This process only takes place after you have made an official offer and sent the pre-approval letter along with a Purchase Agreement contract to the seller.
Do You Need To Be Pre Approved To Buy A House?
Each lender varies in the types of documents required for pre-approval of a mortgage, but sometimes you may need to provide the following:
While you’re in the pre-approval stage, make sure you don’t throw away any of these documents if your first letter expires and you need an update. Even if the lender doesn’t even need these documents and is simply using your credit report for the initial pre-approval letter, be sure to start saving these documents so you have them ready.
There should be no cost associated with the pre-approval letter until it goes to underwriting, and many banks will also waive the initial application fee.
Pre-approval letters are usually provided by lenders within 24 hours; however, the letter itself has a time limit. It’s usually only good for about 90 days, so be sure to check the letter for the expiration date. The letter will have two dates: when the letter was prepared and when the pre-approval expires.
Do You Need A Pre Approval Letter To Make An Offer?
A lot can happen in three months, and lenders need to have the most up-to-date information about your financial standing to give home buyers a realistic idea of what they’ll be approved for.
Don’t worry if you don’t find the right home in this period, it’s usually a simple task to update a pre-approval letter. Your loan officer will request updated pay stubs, bank statements and may re-use your credit.
You don’t need perfect credit to get pre-approved, but it’s important to be aware of how starting the pre-approval process will affect your credit history.
To be pre-approved, your credit must be drawn. This will count as a difficult investigation. Unlike a soft inquiry, a hard inquiry can lose your credit. Typically, if there is a hit, it’s only a handful of points, but multiple hard inquiries can be a bad sign for lenders.
Do I Need To Be Pre Qualified For A Mortgage?
Your time frame to shop before the inquiries start to pick up can be between 14 and 45 days. Be sure to ask the lender what scoring model they use.
Additionally, FICO scores will ignore any hard mortgage inquiries in the 30 days before your score, so if you go to a second lender a week after you’ve been pre-approved by the first, your first hard inquiry won’t be reflected in your scores . yet.
This gives home buyers a solid period of time to gather all the pre-approval information from multiple lenders to get the best deal.
Your pre-approval is based on the information you give the lender at that time. If anything changes with your finances between then and the time you close on a home, you run the risk of having your pre-approval terms change or being denied a loan with that lender altogether.
Boston Pre Qualification, Pre Approval, And Commitment Letters In 2022 Boston Condos For Sale Ford Realty
After pre-approval, you can track your credit score using a free website like credit karma. Be sure to monitor it for any big swings.
After pre-approval, be sure to exercise strict financial willpower, continue to save money if your closing costs are more than originally estimated, and get serious about finding and making a home that fits your budget.
Remember, if you initially go with one lender and decide later at closing that you would prefer another, you are not locked into that loan from pre-approval.
This is a snapshot of a loan estimate. The signature is confirmation of receipt, not a binding agreement to the terms. You can see a complete example of a loan estimate on the CFPB website.
What Do I Need For Mortgage Pre Approval? 7 Documents
If the terms of the loan estimate and subsequent closing disclosure do not meet your expectations, you may change lenders prior to closing. Those who shop around for a loan can see tremendous savings over the life of the loan. A chart from LendingTree shows the staggering savings a borrower requesting 5 offers can save up to $68,871.60! It is worth taking the time and effort to do so!
Remember, if your closing disclosure is not what you expected, you should ask your lender for clarification or correction before proceeding with the transaction. If the terms aren’t what you expected, you don’t have to close with that lender. Having those other offers available means you can reach out to another lender. To avoid a disruption in the closing, stay on top of all these documents and follow up on issues as quickly as possible.
Amanda Farrell is a digital media strategist at She enjoys being part of a team that gives consumers peace of mind as they make one of the biggest purchases of their lives. She lives in Sarasota with her bunny, Buster, and enjoys painting, playing the guitar and mandolin, and yoga. Home shopping often begins in a lender’s office with a mortgage application and not at an open house. Most sellers expect buyers to get pre-approved for financing and are usually willing to negotiate with those who prove they can get a loan.
A mortgage pre-qualification can be useful as an estimate of how much someone can afford to spend on a home, but a pre-approval, which is often valid for 60 to 90 days, is more valuable. This means that the lender has checked the buyer’s credit, verified assets and confirmed employment to approve a specific loan amount.
Get A Mortgage Pre Approval Letter
Buyers benefit by consulting with a lender, obtaining a pre-approval letter and discussing loan options and budget. The lender will provide the maximum loan amount, which will help determine the price range for the home buyer. Amortgage calculator can help buyers estimate costs.
Mortgage pre-approval requires a buyer to complete a mortgage application and provide proof of assets, confirmation of income, good credit, employment verification and important documentation.
Pre-approval is based on the buyer’s FICO credit score, debt-to-income ratio (DTI) and other factors, depending on the type of loan.
Except for jumbo loans, all loans meet Fannie Mae and Freddie Mac guidelines. Some loans are designed for low- to moderate-income homebuyers or first-time buyers. Others like Veterans
