How to Get Pre-approved for a Mortgage

Getting pre-approval for a mortgage is an important step in your search for a new home. After talking to a lender, you will obtain a pre-approval letter that provides the opportunity to discuss your financial options. You can discuss budgeting and loan options with the lender. 

 

This will help you clarify your house-buying budget. You can find out the mortgage payment that you can afford every month. It is important to understand how to get pre-approved for a mortgage. 

 

The Pre-approval Process

A home seller will usually ask for proof of funds or see a buyer’s mortgage pre-approval letter. This helps show that the buyer is serious about the deal. After filling out the mortgage application and providing your Social Security number, the lender will carry out a credit check. 

 

You may also need to provide documentation on your assets and liabilities, employment history, and income tax returns. After reviewing the buyer’s application, the lender can either offer pre-approval, deny pre-approval, or offer pre-approval with some conditions. 

 

Factors That Lenders Consider

Before lenders pre-approve a mortgage, they look at several factors in what is known as a hard credit check. They will look at the buyer's credit score, credit history, debt-to-income ratio, and employment history. They will also look at income as well as assets and liabilities. 

 

A mortgage is a thorough examination of the buyer’s finances. Lenders will poke through all areas of the buyer’s financial life to assess creditworthiness. This is done to determine whether a potential buyer will be able to repay the mortgage. 

 

Pre-approval vs. Pre-qualification

It is important to find out the difference between pre-approval and pre-qualification. With pre-qualification, the buyer will provide a general overview of his income, finances, and debts. The lender then offers an estimated mortgage loan amount. A pre-qualification can give you an idea of how much you can afford to pay for a home. 

 

Unlike pre-approval, a pre-qualification does not carry much weight when you are making offers. The lender does not verify your financial details or access your credit reports and cannot approve a specific loan amount. 

 

When You Should Get Pre-approval

Mortgage pre-approval letters have an expiry date. They are usually valid for between 60 to 90 days. Lenders place an expiration date because the buyer’s credit profile and finances can change. After expiration, the buyer will need to go through the application process again. 

 

This means filling out a new application and submitting updated documentation or paperwork. If you are thinking of buying a home, going through pre-approval will help you identify any potential credit issues. Seeking pre-approval well in advance will help you improve your credit profile.

 

Shopping for Mortgage Rates

The pre-approval process allows home buyers to shop around for the best mortgage rates. If you are serious about your home search, pre-approval can help you improve your buying position. With advance pre-approval, you can have time to save for a down payment and the closing costs. Getting the approval places you in a much better position to get the best mortgage rates. 

 

Some online lenders can get you pre-approved within hours, while some lenders will take several days. To improve your chances of getting pre-approval, find out the factors that lenders evaluate in a financial profile.


 

For more information on mortgage pre-approval, visit Pacific Real Estate Group at our office in Rancho Cucamonga, California. You can call 888-452-0974 today to schedule an appointment.