What is a Mortgage Pre-Approval and How Do I Get It?

A mortgage pre-approval is an important element of the home buying process. A pre-approval requires you to officially put in an application for a mortgage. The financial institution determines whether you should be entitled to a mortgage as well as the dollar amount you’re approved up to after reviewing your application. Most sellers desire a prospective buyer to be pre-approved.

Exactly why is it significant to have loan pre-approved?

It is necessary to get previous acceptance for a number of reasons. It will tell you just how much you can spend, so you don’t waste valuable time looking at homes that are not within our budget. It will also help you to expedite the process when you find the house you would like to purchase.

What does being pre-approved for a mortgage loan actually mean?

Being pre-approved means that your credit worthiness has been evaluated by a lender and they have also determined a maximum loan amount. Generally, be pre-authorized means the financial institution is prepared to provide a certain mortgage loan on the basis of the details you supplied at time of pre-approval.

What is the difference between being pre-qualified and being pre-approved for a mortgage?

A pre-qualification is the calculation by a lender to determine how much money you may be eligible to borrow. A pre-qualification does not mean that the bank will approve the loan. Pre-qualifications are usually free. Being pre-approved means that the lender is ready to approve a particular mortgage loan based on the information you supplied at the time of pre-approval. The pre-approval tells you how long it is valid for and can contain any other conditions to get the loan. You don’t have to pay a lender anything at this stage, except for the cost of a credit report.

How do I get a mortgage pre-approval?

You should talk to a few lenders to find loans that best fit your financial situation. Lenders require certain information, including income, employment status, time employed, and debts you may have. Debt examples include student loans, car loans, and credit cards. They will also want to know the source of your down payment. You will be asked copies of your tax returns, bank statements, and W2 forms. The lender will use this information to determine the maximum loan you can qualify for and what the monthly payment will be. Unlike the pre-qualification, pre-approval involves a request of your credit history and a review of the application and documents you provide. A pre-approval is only valid for a certain amount of time, so you should not request a pre-approval until you’re sure you will buy housing within the next 90 days. Mortgage pre-approvals give you a firm idea of what you may be able to borrow, but they are not a concrete guarantee that you will get the same loan amount.