How to Get a Mortgage Preapproval

Getting a Mortgage Preapproval

It is important to get mortgage preapproval if you are shopping for a home. It lets you know how much you can borrow when buying a home. It is going to make you attractive to sellers and you will know any problems that might make it hard for you to get the loan. If you want to get preapproved, provide the lender with documents used in verifying personal, financial, and employment information.

The easiest way to get started on your preapproval is seeing how much you can afford. Take 30 seconds to check your custom rate and closing cost options! You’d be surprised what is available to you.

A mortgage preapproval in simple terms is a letter coming from a lender that says they are willing to lend you a given amount for a house.

Getting preapproved is an important step when buying a home. Sellers will be interested in seeing a preapproval letter before they accept the offer you put on their home. For them, it shows them how serious you are and whether you can afford the property.

The good thing is applying for preapproval is simple and quick. You don’t have to spend a lot of time and effort on the process. What do you need to do when you want to get a mortgage preapproval and how is it going to help you with the process of buying a home?

mortgage preapproval

How Much House Can You Afford? 

  • What is a mortgage preapproval? 
  • How long is it going to take to be preapproved for a mortgage? 
  • What is the difference between mortgage prequalification and mortgage preapproval? 
  • Is getting a mortgage preapproval worth it? 
  • Getting a mortgage preapproval 
  • Gathering the required documents 
  • Getting quotes from the different lenders 
  • Avoid getting preapproved too far in advance 
  • Choosing the right lender for you 

What is a Mortgage Preapproval?

The is conditional approval from a lender for a home loan where you get a preapproval letter. This letter is going to let the seller know that you are going to be approved for a given amount. The exact amount is going to depend on the information you provided the lender with when applying for preapproval. One thing you need to keep in mind during this process is getting a mortgage preapproval doesn’t mean that you are going to be guaranteed a mortgage. The terms that you are offered can change once you have submitted a formal and complete application.

How Long is it Going to Take Before You are Preapproved for a Mortgage? 

The time it takes to get preapproved is going to vary from one lender to another. The process can take a few minutes while there are times it can take even more than 10 days. If you don’t have much time, figure out how long the process is going to take with each of the lenders you are considering.

What is the Difference Between a Mortgage Prequalification and Mortgage Preapproval?

The difference between the two is the level of scrutiny that takes place on the information you have provided to the lender. A prequalification is going to be issued even without verifying your income, assets, employment history, etc. This process will assume that you have provided accurate information. A preapproval is only going to be issued after the lender has verified the information you have provided.

Is a Mortgage Preapproval Worth it?

There are many benefits you can expect to get through mortgage preapproval. You are going to get an idea of how much you can borrow, which will help you narrow down your options so you can only focus on houses that are within your price range. Something to keep in mind is that just because you have been approved for a given amount doesn’t mean you have to borrow all of it.

It is a good idea in many cases not to borrow the maximum amount. Many mortgage lenders are going to use your gross monthly income (instead of net monthly income) when determining the amount you qualify for. When the lender tells you you can qualify for a given amount, it doesn’t mean applying for all of that amount.

The lender doesn’t factor in your daily living expenses -things like utilities, groceries, healthcare, childcare, or entertainment – or monthly debts when calculating. You are the one to go through your budget and ensure you are comfortable with that loan amount. You shouldn’t be leaving it up to the lender to determine how much you can afford.

The preapproval process can also show you issues that might make it harder for you to get a mortgage, so you can work on them before you fall in love with a given house.

When you get a mortgage preapproval, the sellers will know that you have borrowing power and can back up the offer. This is going to make it more competitive. The real estate agents usually work on commission, and they will see spending time on you is worth it because there is a good chance of the transaction going through. The lenders will also see you as a savvy borrower who is going to take a loan in the near future.

Mortgage pre-approval shows that you are a serious buyer.

Getting Preapproved for a Mortgage 

The process of getting preapproved for a mortgage is not that complicated, it is pretty straightforward. You need some paperwork and a few days for the lender to verify the information you have provided. Different lenders have different processes, but they will usually look at credit history assets, debts, and income before they decide to give you preapproval and for what amount.

Gathering The Appropriate Documents

Lenders have to verify your identity, employment history, credit history, financial assets, and income before issuing a preapproval. You will be asked to fill out a uniform residential loan application – many people call this a ten-oh-three or 1003.

The 1003 application will ask for financial information, personal information, and loan information. These include:

  • Bank accounts, retirement accounts, etc.
  • Assets you have 
  • Employment and income details 
  • Property you own 
  • Debt owed and liabilities 
  • Employer contact information

The lender is going to do a hard credit check, and this might need you to provide more documents based on your current situation, such as tax returns, pay stubs, and bank statements.

Getting Quotes from Different Lenders

When buying a house, you are most likely trying to find the best deal. This should be the same case when you want a home loan.

Every lender has their own guidelines and interest rate options, and this can have a very significant effect on monthly payments. If only one lender has preapproved your mortgage, it means you are stuck with what they are offering. When it happens with many lenders, then you have the freedom of choosing an option that works best for you. There are many lenders out there that let you apply for a preapproval, which makes things a little easier for you.

Before you choose a potential lender, you need to research as much as possible. Research of the lenders and even the loan officer that is going to handle your mortgage – there is a big difference in experience and knowledge, depending on who is processing the application.

After choosing some lenders, you will provide the information needed to complete the application process. An underwriter is going to go through your application closely and determine the amount you qualify for. You haven’t been fully preapproved for a mortgage if an underwriter has not reviewed the application- This is why it is important to find out about the status of the application during the process.

Once you provide the lender with all the documents, it is going to take a couple of days to know if you are preapproved and how much you have been approved for. The preapproval can take more time if you have declared bankruptcy in the past, a foreclosure, poor credit, or IRS lien.

When shopping around for a mortgage, there is a window of time that many credit inquiries by lenders are going to be counted as just one inquiry of your credit score. This window is usually 14 days – but it can be longer than that.

Avoid Getting Preapproved Too Far in Advance

When you get your preapproval letter, it is going to say that it is good for 30-90 days. This is a short period, which makes it a good idea to wait until you are ready and feel like you want to start looking for your new home. keep in mind that it is conditional approval. If things change during that period, then there is a risk of your mortgage not being approved. If you change jobs, rack up more debt, or reduce your savings, then you can expect that.

Choosing a Lender 

When you make an offer on a house you like, the next step is getting official loan estimates from potential lenders. After applying for your mortgage, the lender needs to give you an estimate within three business days from when you received the application. The document is going to have estimates for your monthly payments, interest rate, taxes, closing costs, insurance, and more details on how the loan works, e.g., penalty fees. Once you have compared and reviewed the estimates, you can then go with the lender who meets your needs. The lender will then complete the application.

Mortgage Rates Where You Live

Refinance or mortgage rates depend on a number of factors, one of them being where you live. If you want to understand what rates you qualify for, which includes the average refinance or mortgage rate in your area, You can check many places on the web for rates, or you can check rates using our Rate Quote and Closing Cost Tool. It’s fast and FREE!

What Next?

There are many benefits a potential home buyer can expect to get from getting preapproved for a mortgage.

If you don’t end up being preapproved for a mortgage, there are things you can start doing to work on the issues. This can mean paying down your debt so that your debt-to-income ratio improves, or saving more to increase your down payment. It can also involve addressing and dealing with inaccuracies in your credit report. Whatever the outcome, the preapproval process will prove to be a great thing because you will know the issues you need to address before you can start searching for a house. If you don’t do that, you might be surprised later when you make an offer.

When you do things upfront, it is going to pay off. When you have the preapproval letter with you, the home-buying process becomes easier and you stand out from the rest.