How To Get A Home Mortgage Pre-Approval

The process of shopping for a new home starts well before the open house. Employment details, income, debt, and financial accounts – every aspect is essential when trying to get your hands on that all-important pre-approval letter. But, before you buy a home, you need to work with a lender to assess your credit score and your report profile. This will give you an idea of what kind of rates you might be eligible for. At this stage, the lender you are working with takes a detailed look through your credit history and double-checks your income and other details – a step that doesn’t happen during pre-qualification. Once satisfied, the lender will give you a pre-approval letter, that mentions a few things. It should ideally state that your loan will be approved once you make an offer on a house and after you submit documents for the introductory title information, the contract, appraisal, and your income and assets. This is a good step in the direction of getting a loan but no guarantee that you will finally receive it.

What Does Pre-approval Mean?

Pre-approval is an offer by a lender to loan you money under specific terms. It means that the lender is sure you can make your down payments and you make enough money to cover any future mortgage payments. Often the offer is time-bound and expires after a couple of months. But this is all subject to an appraisal of the property and other conditions. Here, the lender tries to verify that the value of the property being used as collateral is equal to or more than the price it was purchased at, for the process to move forward.

Steps To Getting A Mortgage Pre-approval:

  • Pre-qualification – A mortgage expert will usually interview you about your income and expenditure. This will help give you a primary clue of the price range that you will be able to afford but doesn’t quite get you closer to a mortgage.
  • Pre-approval – Pre-approval means the lender has done his checks and tells you about the loan you qualified for, the highest amount you can borrow and interest rate offers. But, remember that your loan representative is not the final word when it comes to approving your loan. An automated underwriting system usually is what finally delivers a pre-approval letter and gives you a checklist of requirements that must be completed for approval.
  • Mortgage commitment – Once your mortgage lender has approved you as well as the property you’d like to buy, they will issue a loan commitment. Next, the representative of the loan will need to submit the entire application to an underwriter who will examine and validate your capability and readiness for loan repayment.
The next step involves the underwriter returning one of four verdicts – approved, approved with conditions, suspended which means you need to submit additional documentation before a decision, or denial. Processing Your Pre-approval – The only thing you need to do at this point is to give the lender all documentation they deem necessary. The loan representative can ask to see pay stubs, tax returns, bank account statements and W-2 forms for the past couple of years as well as other documents that show sources of income and more. If your down payment is a gift or from the sale of an asset, you’ll need the necessary papers to prove it. Finally, you must understand that a mortgage pre-approval is not a guarantee, but with it, any offer you make is far more legit to your real estate agent or a home seller. It is understood that this is as close as you can get before your mortgage application goes through the underwriting process. Though, any lender is well within their rights to rescind an offer if the financial situation changes or if they are unsatisfied with documents provided.