What is a Mortgage Preapproval?
A mortgage preapproval is the process that lenders utilize to determine how much money you can qualify for on a mortgage loan. If you qualify for a preapproval, you’ll receive a preapproval letter that can be used as you search for and buy your new home.
Overview of the Preapproval Process
To begin the preapproval process, you will need to submit an application and financial documents to the lender. These documents will typically include your taxes from the past two years, income verification documents such as pay stubs or bank statements, and you will also need a valid ID.
Once the lender has this information, they will review your financial information in depth. This will also include running a credit check and receiving a credit report. Once all this has been taken into account, you’ll be able to be preapproval for a specific loan amount that you qualify for. This preapproval will be valid so long as have fully disclosed your financials and your credentials remain the same. Your lender can also provide you with a preapproval letter to be used when submitting offers on a new property.
Why Pre-approvals Give You an Advantage
There are 4 major reasons that getting a preapproval can give you an advantage when purchasing your new home.
Stay Within Your Budget
Knowing how much you can qualify for before you shop for a home can make the process much easier, especially when you know how much of a payment you can expect. After you’ve received your preapproval, you can verify with your lender what the estimated monthly payments will be for the loan amounts you are considering. Then you can examine your budget and ensure you know just how much you can afford each month for your payment. This will help you to shop for home within your budget.
Be More Competitive
Having a preapproval shows that you are a serious buyer when it comes to purchasing a home. Your preapproval letter can be submitted with your home offers to show that you can qualify to purchase the home you’re interested in. This makes your offer much more competitive over those who have not been preapproved.
Helps you closer faster
Closing on your mortgage loan can be a much quicker process with your preapproval. Your lender already has the bulk of your financial information and may only need to request a few additional documents for you to close. This saves time and can be another factor that makes you have a more competitive offer as well.
Eliminates any surprises
Surprises aren’t always positive when it comes to mortgage loans and buying a home. To avoid any surprises that could keep you from qualifying for a mortgage loan or even prevent you from qualifying for a specific home that you’ve already fallen in love with, a preapproval can be a great option. During a preapproval, the lender will review your financial details and can inform you of any concerns or problems that may arise later in the process.