When Should You Get Preapproved
When you apply for preapproval, your lender will first gather some basic financial information from you and pull your credit report. In most cases, that means a hard inquiry on your credit, which could affect your credit score. Given this, you shouldn’t apply for preapproval until you’re serious about buying a home. This will both protect you from impairing your credit score unnecessarily and ensure that your preapproval is valid when you’re ready to make an offer a home-loan preapproval letter is typically only good for 30 to 60 days.
Having multiple preapproval letters from a few different lenders will only strengthen your hand. And if you get multiple inquiries for the same type of credit within a short period of time, the credit bureaus will usually treat those as one inquiry and avoid knocking your credit score.
Should I Apply For Multiple Conditional Or Pre
When looking for the right financial product and the interest rate the advice is always to shop around, but when you apply for home loan pre-approvals the opposite is true. Applying for multiple conditional or pre-approvals can have a negative impact on your credit score.
Research is still important, but it should be done well before you formally apply for a conditional approval. A conditional approval should not form part of your research and comparison, rather you should only apply for a home loan conditional or pre-approval once you have decided on a suitable lender.
You can also ask your lender to make recommendations before they make a credit enquiry. This will help you to decide on the best lender without affecting your credit score. A mortgage broker is also helpful when it comes to finding the right lender. They can assess your situation and give you an idea of your borrowing capacity with lenders without making formal enquiries.
Dont Let Multiple Lenders Lead To Multiple Application Fees
When you apply for a mortgage, working with two or more lenders at once can help you find the best deal.
However, what you dont want is to end up paying multiple fees for multiple applications.
For example, if you get far enough into the process of a mortgage application, you will need to pay for an appraisal.
While having one appraisal is necessary, paying for multiple appraisals isnt the best use of your money.
Instead, find one lender with whom you feel confident. Vet them by the things that are most important to you.
For some homeowners, its all about the closing costs and the interest rate. For others, closing costs and interest rates may be important, but paying a $100/day penalty to the builder because your lender couldnt close on time can end up being much costlier than an additional 0.125% on the interest rate.
In other words, service and being able to close on time, can prove to be just as important if not more than a slightly higher interest rate.
Know whats important to you so that you can shop and compare accordingly.
Questions To Ask Your Lender Or Broker When Getting Preapproved
When getting preapproved, ask your broker or lender the following:
- how long they guarantee the preapproved rate
- if you will automatically get the lowest rate if interest rates go down while youre preapproved
- if the pre-approval can be extended
Ask your lender or broker about anything you dont understand.
Reasons To Apply To Multiple Lenders
It’s difficult to know you are getting the best deal if you have not compared it with other offers. With laws limiting how mortgage companies are compensated, there is less variance in rates and fees from company to company than there was in the pastduring the 2000s, for example. However, subtle differences remain, and what looks like small interest rate savings now could translate to a large dollar amount over 15- or 30-year mortgages. Use a mortgage calculator to compare how different rates would impact your monthly payment.
Moreover, different lenders structure loans in different ways with regard to rates and closing costs, which carry an inverse relationship. Some lenders ramp up closing costs to buy down your interest rate, while others that advertise low or no closing costs offer higher interest rates in exchange.
Recommended Reading: Can You Get A Reverse Mortgage On A Manufactured Home
What A Mortgage Pre
Once you have been pre-approved for a mortgage, you will receive a pre-approval letter or certificate. You can then use your pre-approval letter as proof to sellers that you will be able to afford the home purchase or use the pre-approval amount to help guide you on your home search. Your pre-approval letter will include information such as:
- Your preapproved mortgage amount:This is the maximum amount that the lender is willing to let you borrow.
- Home price: This is the maximum price of a home that you can afford to buy based on your down payment.
- Mortgage interest rate: This mortgage rate is locked in for a period of time. If you apply and are approved for a mortgage within this period, you are guaranteed to have this rate, even if market rates have increased.
- Expiry date: Mortgage pre-approvals usually have a rate lock that expires in a certain period of time, from 60 days to 130 days. After this date, your mortgage rate is no longer guaranteed.
- Mortgage type: Your letter will show what mortgage terms your pre-approval was based on, such as the amortization, mortgage term, and LTV ratio. Your pre-approval letter may also specify your down payment and monthly mortgage payment amount.
Consider Other Associated Costs
As you go through the mortgage process, it’s important to think about the true cost of owning a home. Besides the costs required at closing and regular mortgage payments, there are other recurring costs such as property tax, home insurance, heating costs, condo fees and more. Even though pre-approval specifies an amount you may be approved for, consider a lower principal amount to reduce regular expenses while leaving money for other unforeseen expenses.
Also Check: Rocket Mortgage Payment Options
Get Your Financial Paperwork In Order
You are under no obligation by getting pre-approved, but you want to be comfortable with the amount and terms of your pre-approved mortgage. That’s why it’s essential that you review all your personal expenses and have a good idea of your future expenses before you talk with a mortgage broker or lender about pre-approval. Learn more about knowing how much you can afford.
How Many Times Can You Pull Credit For A Mortgage
There is no real limit to how many times you can pull credit for a mortgage. Most borrowers have their credit pulled for pre-approval and again at closing to make sure it hasn’t dropped. On occasion, lenders may pull credit again during the underwriting process if a long period of time has elapsed since your pre-approval or if they are verifying that you completed something such as paying off a debt, or if a dispute was removed.
Recommended Reading: Does Prequalifying For A Mortgage Affect Your Credit
Lender Review Of Credit And Documentation
Next, your lender will review all of your documents, pull your credit report and seek to verify all of your information. This may include calling current and previous employers to verify your employment and wages, confirming outstanding loan amounts and investigating unusual transactions on your bank statements. Normally, this process should take no more than a few days.
Tips For Mortgage Pre
Even if you have been pre-approved by your bank or mortgage broker, your application could get denied and you might miss out on the opportunity to secure mortgage financing.
We help you navigate the financial rocky road to get you the best chance of a mortgage approval. Here are four reasons some people might be denied loans:
Don’t Miss: Recasting Mortgage Chase
What To Bring To Your In
We want you to be ready for the pre-approval process and being prepared will help. For your meeting, you should plan to bring the following:
- Current address
- Previous address
- Current employment information
- Previous employment information
- If self-employed, the last 2 years Notice of Assessments from your Income Tax return
- Value of properties, automobiles, investments, and savings
- Most recent statements for mortgages, loans and lines of credit
- Most recent credit card statements
- Estimated value of your home
- Housing expenses
- Financial information for your co-borrower, if applicable
- Social Insurance Number
Contact Multiple Lenders Now
Consumers typically dont think twice about shopping around for cars, or even basic household items. Dont be afraid to apply this same logic when it comes to shopping for a mortgage loan.
Applying for more than one mortgage at once allows you to compare costs, rates, program options and even testdrive lenders prior to committing to just one lender.
At the link below, get connected with multiple loan experts and start the shopping process today.
Also Check: Can You Refinance A Mortgage Without A Job
Can You Use Your Mortgage Pre
Mortgage pre-approval applies to a single property and you cannot divide the loan amount you are approved for to buy multiple properties.
For example, if you are pre-approved for a $300,000 mortgage you cannot use a $150,000 loan to buy one property and another $150,000 loan to buy a second property. If you want to buy more than one home, you can apply for multiple pre-approvals but each approval only applies to a single property.
When you apply to be pre-approved for a mortgage, the lender assumes you are only buying one property, which means you are paying property tax and homeowners insurance for a single home. If buying multiple properties increases your total housing expenses, you may qualify for a smaller mortgage amount. Buying multiple homes at the same time may also increase your closing costs and impact the loan you can afford.
Additionally, when you are pre-approved, the lender uses a specific mortgage rate to determine the loan you can afford. The rate for a mortgage on a second home is higher than the rate for a loan on your primary residence and investment property mortgage rates are even higher.
The different interest rates means that the loan amount you are pre-approved for on a home you live in is higher than the rental property mortgage you qualify for. If you attempt to buy different types of properties, the mortgage amount you are approved for changes.
- Top Lenders
How Long Is Mortgage Pre
Pre-approval is typically valid for 3-6 months, but it will vary between lenders. Ideally, if you want to move on with a different lender, youâll make the switch before youâve got serious about a property. You can typically extend your pre-approval by simply ringing up your bank or mortgage broker.
Recommended Reading: Rocket Mortgage Requirements
Mortgage Preapproval: Everything You Need To Know To Get Preapproved
Getting that letter is one of the first and most important steps in the home-buying process.
Your home-buying journey starts with getting a loan preapproval letter.
Buying a home — especially for the first time — is a complicated process. One of the first and most significant steps of buying a home is getting your mortgage preapproval. It’s proof that you’ve lined up the financing you need to close on the home. Without a preapproval letter, most sellers aren’t going to take your offer seriously.
Although some lenders have tightened their standards due to the pandemic, it’s usually not too difficult or complicated to get a home-loan preapproval. Let’s look at how it works.
Ask Each Lender For The Same Kind Of Loan With The Same Features
You want to be comparing apples to apples when you get your Loan Estimates. At this point in the process, you should already have a pretty good idea of the kind of loan and features you want:
If youre unsure about any of these options, click the links above for specific information, revisit our Explore loan choices phase for a step-by-step overview, or have a more exploratory conversation with lenders.
Also Check: Reverse Mortgage For Condominiums
Mortgage Declined After Agreement In Principle
An âagreement in principleâ is given by lenders to say that, based on basic information about you, they believe they would give you a mortgage if you applied for one. It can be useful to have an agreement in principle when youâre house-hunting, as it gives you an idea of what you can afford, and some housing agents will check you have one before letting you view property. But it doesnât guarantee you a mortgage, and it is possible to be refused by a mortgage provider after theyâve given you an agreement in principle.
If this happens, itâs often because the lender found something that didnât meet their criteria when they did a full search of your information. You may be able to find out what it is by asking the lender. You may also find it helpful to use a mortgage broker, whoâll be able to assess your financial and credit information and find a mortgage thatâs likely to fit.
Applying For Conditional Or Pre
Before you apply for pre-approval you should:
Check your credit score
Ensure all details on your credit report are correct
If necessary, take steps to improve your credit score by demonstrating positive credit behaviour
Research and compare lenders and/or discuss options with a mortgage broker
Decide on a lender
Discuss your options and possible borrowing power with your chosen lender
A home loan conditional or pre-approval application can often be completed in your own time through an online application process. The information and supporting documentation used in your application is generally the same as that of a formal home loan application, which saves you time later down the track. With the ease of online applications, it may be tempting to apply multiple times, but remember that with multiple applications for credit, even home loan pre-approvals can hurt your credit score.
Find a suitable lender and stick with them to ensure you are given the best rate and a competitive deal on your home loan. With just one conditional approval or pre-approval in your tool box, all thats left is to find the perfect property, or in the case of the latter, make the offer. Good luck!
At Mortgage House, were no strangers to the property buyers journey. Its a long one. If youre thinking of applying for a home loan, you can Apply Online today to get started!
Impact Of Additional Debt After Pre
Mortgage pre-approvals are not the same as mortgage approvals. Being pre-approved or even approved for a mortgage does not mean that you can go ahead and make large purchases without rocking the boat with the lending ratios which may cause concern with the final mortgage lender approval.
With the debt-to-income ratio, the chances of getting a mortgage loan is in your hands. It can be defined as a comparison between your earnings in relation to your expenses to cover regular monthly debts. If you have too many debts it might be harder to get approved.
Before you buy anything, consult with us just to be safe, but its best to try not to open any new credit lines or purchase anything major. Once you know everything is finalized then feel free to do so.
Whats Included In A Pre
- Loan program
- The purchase price
- The qualified interest rate
At this stage, you arent applying for an official loan yet. This is not a loan commitment and without a signature, this isnt a legally binding document.
Until an Underwriter receives documentation to confirm your income and issues the Loan Estimate also known as the Mortgage Commitment Letter, there is a possibility the numbers in the pre-approval letter will change. This process doesnt happen until after you make an official offer and send the pre-approval letter along with a Purchase Agreement Contract to the seller.
Every lender is different in the types of required documents for a mortgage pre-approval, but sometimes you may need to provide the following:
- Thirty days of pay stubs
- Two years of federal tax returns
- Sixty days or quarterly statement of all asset accounts including checking, savings, and any investment accounts
While in the pre-approval stage, be sure not to throw away any of these documents in case your first letter expires and you need an update. Even if the lender doesnt require these documents at first and simply uses your credit report for the initial pre-approval letter, be sure to start saving these documents so you have them ready.
There should be no costs associated with the pre-approval letter until it goes to underwriting, and many banks will also waive the initial application fee.
Read Also: Requirements For Mortgage Approval
What To Provide To Your Lender Or Mortgage Broker
Before preapproving you, a lender or mortgage broker will look at:
- your assets
- your income
Youll need to provide the following:
- proof you can pay for the down payment and closing costs
- information about your other assets, such as a car, cottage or boat
- information about your debts or financial obligations
For proof of employment, you may have to provide:
- a proof of your current salary or hourly pay rate (for example, a recent pay stub
- your position and length of time with the employer
- notices of assessment from the Canada Revenue Agency for the past 2 years, if youre self-employed
Your lender or mortgage broker may ask you to provide recent financial statements from bank accounts or investments. This will help them determine if you have the down payment.
Your debts or financial obligations may include your monthly payments for: