How To Get A Mortgage: Youll Eventually Need To Get Pre
Once your home search heats up and youre serious about getting a mortgage, youll eventually need to get pre-approved. A pre-approval proves you have the resources to make a home purchase and helps you act quickly when you find the perfect home.
But, if youre just beginning your search, it makes sense to start by getting prequalified so you see where you stand. You can learn how to get a mortgage later.
Ready to find your dream home? See if you prequalify.
Mortgage and Home Equity products are offered by U.S. Bank National Association. Loan products are offered by U.S. Bank National Association and subject to normal credit approval.
Check Your Credit Score
The first place to start is reviewing your credit report and getting your credit score. Check with your bank or your credit card companies as they’ll often provide these for free. And each of the three national credit rating agencies, Equifax, Experian, and TransUnion are required to provide you with one free credit report per year.
You can request a report by going to annualcreditreport.com, or by calling the credit reporting agencies. If you’re planning to purchase the home with your spouse or another person, they need to request and review their credit reports as well. Review your credit reports for any incorrect information and, if you find any, contact the credit reporting agency to request a correction.
Check your , which is a number between 300 and 850. A higher score not only improves your chances of getting a mortgage loan, but may also help you qualify for a lower interest rate.
Don’t wait until you have found the home you want before looking for a mortgage. This will give you time to improve your credit score by reviewing your credit report for accuracy, paying your bills on time, and reducing your balances on your credit accounts.
What Happens At A Home Appraisal
You and your significant other have been dreaming about houses for months. She likes colonials and you like ranches you want to be in the city and she wants to be in the suburbs. Options and decisions may already seem overwhelming and you haven’t even started to shop yet. You both may have a fuzzy idea about what you can afford, but not really. Mortgage pre-qualification will not answer what style of home to buy, but it will take the guesswork out of home financing and will make searching for your new home more efficient.
Also Check: Does My Husband Have To Be On The Mortgage
Does A Preapproval Letter Expire
Once you have your preapproval letter, you may be wondering how long it lasts. Your income, credit history, interest rate think about all the different ways your finances can change after you get your letter. For this reason, a mortgage preapproval typically lasts for 60 to 90 days.
Once it expires, youll need to connect with your lender again with your updated paperwork and apply for a new preapproval letter. The good news is, this typically doesnt take too much time since they have most of your information on file. But bear in mind that re-applying requires another hard inquiry on your credit rating, and your credit score can be further impacted.
Save For A Down Payment
The absolute minimum down payment required by an official loan is about 3%. Of course, this means that even with an affordable home valued at $60,000, you are looking at paying $1,800. Conventional loans require 20%, and if you do not have that, you will need PMI insurance of about 1% on the outstanding loan. This private mortgage insurance makes sure your lender receives payment should you default. Certainly, the larger the down payment you can save, the better chances of getting prequalified for the home you want.
Also Check: Can I Have Multiple Mortgages
Why Apply For A Mortgage Pre
A mortgage pre-approval is an important part of the home buying process. If you are pre-approved, it means that a lender has stated that you qualify for a mortgage loan based on the information you have provided, and subject to certain conditions. A mortgage pre-approval often specifies a term, interest rate and principal amount. Although not a required step, it is helpful as it can give you a clearer picture of how much house you may be able to afford.
Consider Working With Multiple Lenders
Just as you want to get the best deal on the house you buy, you also want to get the best deal on your home loan. Every lender has different guidelines and interest rate options, which can have a big effect on your monthly payments. If you only get preapproved with one lender, youre stuck with what it has to offer. When you get preapproved with multiple lenders, you can choose the offer thats best for you.
Your lender will pull your credit reports during the preapproval process. This is known as a hard inquiry and will usually lower your credit scores by a few points.
If youre shopping for a mortgage, you have a window of time where multiple inquiries are counted as a single inquiry for your credit scores. The window is typically 14 days though it could be longer.
Since its difficult to know which credit-scoring model a lender will use, youll likely want to get all those rate quotes within 14 days.
You May Like: What Income Can Be Used To Qualify For A Mortgage
How Are The Two Different
Prequalification and preapproval do appear quite similar at first glance. The primary difference between them is the amount of vetting done in the qualification process. A preapproval is far more inclusive in the gathering of financial information and data about potential buyers. Other differences between the two include:
What Is A Mortgage Preapproval
When youre shopping for a mortgage, you can compare options offered by different lenders.
Mortgage lenders have a process which may allow you to:
- know the maximum amount of a mortgage you could qualify for
- estimate your mortgage payments
- lock in an interest rate for 60 to 130 days, depending on the lender
The mortgage preapproval process may be divided in various steps. It may also be called mortgage prequalification or mortgage preauthorization. Different lenders have different definitions and criteria for each step they offer.
During this process, the lender looks at your finances to find out the maximum amount they may lend you and at what interest rate. They ask for your personal information, various documents and they likely run a credit check.
This process does not guarantee your approval for a mortgage.
Don’t Miss: What Will My Total Mortgage Payment Be
How Is A Mortgage Pre
With a prequalification, the lender does not verify any of your information and does not do a deep dive into your finances. The results, therefore, should be considered a ballpark figure that helps you determine how much you can spend on a home.
A pre-approval is a much lengthier process that includes an in-depth review of your current financial situation and credit history. Youll need to demonstrate steady employment, sufficient income to make your monthly mortgage payments and a healthy credit score.
With a pre-approval, once a lender has reviewed your finances , he or she will certify that, based on the assessment, you qualify for a loan from his or her institution for up to a certain loan amount. That certification will be good for a certain time period and can often be renewed.
How Soon Should I Get Preapproved For A Mortgage
Mortgage preapprovals typically last at most about three months, so it doesn’t make sense to get one until you’re ready to start making offers on a home. At that point, you should have done some homework on the housing market that interests you, engaged professionals to help with the homebuying process and, ideally, taken a few steps to spruce up your credit profile to prepare for seeking a mortgage.
When you’re ready to begin making purchase offers, you’ll submit a preapproval application to the lender of your choice. You’ll likely be charged a fee of several hundred dollars, but in most cases you can get that back as a credit if you end up getting your mortgage with that lender. Once you’ve supplied all required documents, a preapproval decision could take a little as one day, but typically takes a day or two longer. Once you receive a preapproval letter, include a copy of it with every offer letter you submit.
Also Check: Do Any Mortgage Lenders Use Fico 8
There’s No Need To Choose A Lender Just Yet
Getting preapproved is important because it helps you shop for a home. But at this stage, lenders arent in a position to give you enough information for you to make a decision about which lender offers the best deal. Getting a preapproval doesnt commit you to using that lender for your loan. Wait to decide on a lender until you’ve made an offer on a house and received official Loan Estimates from each of your potential lenders.
Prequalify For Mortgage Online
Results of the mortgage affordability estimate/prequalification are guidelines the estimate isn’t an application for credit and results don’t guarantee loan approval or denial.
Tools and calculators are provided as a courtesy to help you estimate your mortgage needs. Results shown are estimates only. Speak with a Chase Home Lending Advisor for more specific information. Message and data rates may apply from your service provider.
FHA loans require an up-front mortgage insurance premium which may be financed, or paid at closing and monthly premiums will apply.
For the Adjustable-Rate Mortgage product, interest is fixed for a set period of time, and adjusts periodically thereafter. At the end of the fixed-rate period, the interest and payments may increase. The APR may increase after the loan consummation.
All home lending products except IRRRL are subject to credit and property approval. Rates, program terms and conditions are subject to change without notice. Not all products are available in all states or for all amounts. Other restrictions and limitations apply.
Home lending products offered by JPMorgan Chase Bank, N.A.
Chase, JPMorgan, JPMorgan Chase, the JPMorgan Chase logo and the Octagon Symbol are trademarks of JPMorgan Chase Bank, N.A. JPMorgan Chase Bank, N.A. is a wholly-owned subsidiary of JPMorgan Chase & Co.
Recommended Reading: What Is A Good Ltv For Mortgage
How Long Does It Take To Get Pre
Getting pre-approved for a mortgage can be a stressful, complicated process involving stacks of personal documents and unforgiving loan underwriters. However, there are ways to make this process faster, easier, and less stressful.
If youâre looking to buy in a hot market, you can bet that youâll face plenty of competition. In dense, popular cities like Washington, D.C. or San Francisco, where supply is low, demand is high, and prices rise seemingly by the hour, bidding wars are common. So how do you maximize your chances of getting your dream home?
Pre-approval for a mortgage is one of the best ways to show sellers youâre a serious, qualified buyer, and that you could quickly and smoothly close on a sale. Thatâs because pre-approval is the product of a careful, exhaustive investigation into your finances by your lender, and represents a firm promise on the lenderâs part to issue you a mortgage. A pre-approval letter is essentially a guarantee.
Pre-qualification is simply an estimate of how much of a loan you might qualify for, based on self-reported financial information. For that reason, sellers take pre-approval much more seriously than pre-qualification.
But because itâs the product of a long process, pre-approval isnât an instant, snap-of-a-finger process. In this post, weâll go into detail on how long pre-approval can take, and why.
Your Mortgage: How Long Does It Take To Get Pre
Everyone knows they are supposed to get pre-approved for a home loan before they go house shopping. Its one of those annoying pieces of advice you cant escape, like wear sunscreen.
Groan. You have to do it. But how long will it take to get pre-approved for your home loan so you can get to the fun part?
Fortunately, the approval process isnt as tedious as most new home buyers think its going to be.
Online application and computerized analysis have made everything faster and easier.
Ready to get approved? Start now.
In this article:
You may think it will take a long time to get pre-approved. The process is actually easier than you think:
Don’t Miss: How To Build A Mortgage Business
What Else Are Lenders Looking For
Lenders will also get a good look at your major monthly debts from your credit reports. Theyll use those and the income information you provide to calculate an initial debt-to-income ratio. For VA loans, this key mortgage industry metric looks at your monthly debts in relation to your overall monthly income.
Theyll calculate this figure based in part on the loan amount youre seeking. And that means flexibility can be important for prospective borrowers whose DTI ratio is on the edge. Depending on the lenders requirements and your unique situation, you may need to seek a lower loan amount to get a workable debt-to-income ratio.
The VA typically wants to see a DTI ratio of 41 percent or less. But its possible to go above that and still secure financing. Lenders will usually have their own maximum allowable DTI ratio. We’ll take a closer look at DTI ratio in the next lesson.
Low credit and high DTI ratio are two of the most common reasons why some prospective buyers are unable to get prequalified.
Shop For Homes During The Preapproval Period
When you receive your preapproval letter, itll probably say its good for 30 to 90 days. Since thats a relatively short period, youll probably want to wait to get preapproval letters until youre ready to start seriously shopping for a home. And remember, a preapproval is only a conditional approval. If you rack up more debt, change jobs or reduce your savings, you could get denied when you go to get final mortgage approval.
Read Also: How To Get A Mortgage If Your Self Employed
What’s Involved To Get Your Pre
The six factors that lenders use to qualify you for a mortgage loan:
- Your income
- The property’s value
- Your proof of identity
We’ll help you assess and understand how a lender views your loan application, and what they look for in terms of a strong application.
A strong mortgage application will have these features:
- A housing expense ratio no greater than 39%
- A debt-to-income ratio no greater than 44%
- Proof of steady income
- Good credit standing
- A house that is worth the price the buyer is paying
- You’ll also need to qualify according to the latest federal stress-test rules, which may lower the amount of mortgage loan for which you qualify
Mortgage Rates Where You Live
Mortgage or refinance rates depend on different factors, including where you live. To better understand what rates you may qualify for, including what the average mortgage or refinance rate is in your area, take a look at Credit Karmas mortgage rate marketplace and our latest state-specific guides.
About the author:
Also Check: How To File A Complaint Against A Mortgage Lender
What About Credit
Your credit report will also be pulled to give the lender a full picture of your financial situation. Knowing what is on your credit report allows you see if there are any outstanding debts that need to be paid before you can get a loan.
When your lender pulls your credit report, a copy will be mailed to you from the reporting agency. Make sure to check for any errors or outdated information on your report. If there are errors on your credit report, it is important to dispute them as they will affect your interest rate and the total loan amount that you are eligible for. Discuss any concerns you may have about your credit with your lender.
How Long Does Pre
Although there is no definite duration for the validity of a pre-approval letter, the custom within the real estate industry is that pre-approval is good for between 90 to 180 days, says Reischer. But many may consider it too old after three months.
The reason? In three months, your financial life can change drastically. You could lose your job, buy a car, or do plenty of things that might affect your home-buying prospects. So, lenders and sellers alike will just have a hard time trusting a pre-approval letter thats more than a few months old.
Want to know how long your pre-approval is good for? The actual time frame will be on your letter. If you want a longer time frame, ask for that upfront.
Don’t Miss: Can I Roll My Down Payment Into My Mortgage
How To Get Pre
Getting a pre-approval letter is a straightforward, if somewhat time-consuming process. Hereâs how a typical pre-approval process goes:
- Connect with a loan broker, who will guide you to a lender who fits your needs, or work directly with a bank.
- Fill out a pre-approval application. This can often be done online, depending on the lender.
- Gather and submit all required financial documents along with your application. This can include tax returns, pay stubs, loan history , bank statements, and a gift letter if youâre receiving financial help with your down payment.
- The lender evaluates your income, expenses, liabilities, and credit score, and determines what kind of loan you qualify for, and in what amount.
- The lender issues a pre-approval letter stating the above financing parameters.
This process can take 7-10 days, or more if your initial application packet isnât complete.
It can be a challenge to simultaneously juggle the demands of applying for mortgage pre-approval, looking at homes, and formulating an offer. Partnering with a top agent can help you smooth out your timeline, so the whole buying and bidding process is easier and less stressful.