What Is a Pre-Approved Mortgage and How Can You Secure One?
Forgetting to get pre-approval for a mortgage is one of the worst mistakes that a homebuyer can commit. It closes off certain opportunities. If you are not familiar with this concept and want to avoid mistakes in real estate, this article will explain what you need to know.
Mortgage Preapproval: What Is It?
Mortgage preapproval requires roughly the same process as actual mortgage approval. Like the approval process, it involves evaluating your income, investments, debts, and overall financial profile. The only thing that differs is pre-approval is considered a non-binding statement. In this process, the lenders would evaluate whether you are eligible for a loan and how much your lender could provide you based on your capacity to pay back.
You can use this document as proof to home sellers that you are serious about buying the house. But, more importantly, it can give you an idea of how much your budget for the house hunt would be.
Most people make the mistake of not doing this step because it is not mandatory. But it is a helpful additional step that can make the house purchase process easier since lenders have already reviewed your application. Once you are ready to push through with the purchase, the process will be smoother—as long as the house meets the criteria that were set beforehand.
The Benefits of Getting Preapproved
The preapproval process is not mandatory, but it can give you the following advantages:
- You can determine how much you can borrow from a lender.
- You have an idea of how much your mortgage payment might cost, helping you prepare, re-budget, or negotiate.
- Seeing your financial status ahead might give you enough time to correct or fix any potential issues or errors in your record.
- Going through the process would force you to organize all your documents. When the time comes to finalize the loan, everything will already be in order, hastening the process.
- It brings you one step closer to your homeownership goals by shortening the timeline and other necessary steps.
Steps of a Mortgage Preapproval Process
To give you an idea, here are the steps that one needs to take for the preapproval process:
- Submit the documents required by your lender
- Wait as they conduct a credit check and the determination of your loan amount
Some Important Notes
- Most lenders base their approval using the 28/36 method, in that your mortgage payment should be 28 percent of your gross monthly income. Lenders also prefer that your debts be less than 36 percent of your gross monthly income.
- There is a credit limit for specific mortgage loan providers. For example, a minimum of 620 is the requirement of the conventional mortgage provider, while FHA loans accept 580 for the 3.5% down payment requirement.
If you want a more secure way to process a home purchase, you may want to consider getting preapproved first. It would be an extra step, but it could speed up the process, making your offer much more viable in a seller’s eyes.
Get your pre-approved mortgage from the best home mortgage lenders. EST Home Mortgage’s goal is to help you live in your dream home. We prioritize excellence, service, and trust and want our clients to experience smooth, seamless, and stress-free financial assistance.
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