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.
What To Do If A Lender Refuses Your Mortgage Application
A lender could refuse you for a mortgage even if youve been preapproved.
Before a lender approves your loan, theyll verify that the property you want meets certain standards. These standards will vary from lender to lender.
Each lender sets their own lending guidelines and policies. A lender may refuse to grant you a mortgage if you have a poor credit history. There may be other reasons. If you dont get a mortgage, ask your lender about other options available to you.
Other options may include:
- approving you for a lower mortgage amount
- charging you a higher interest rate on the mortgage
- requiring that you provide a larger down payment
- requiring that someone co-sign with you on the mortgage
Be A Smart & Savvy Homebuyer
Opening the door to a home that youve worked hard to earn is undoubtedly a great feeling, but the financial undertaking of homeownership is not to be underestimated. On top of your mortgage, many other expenses will squeeze your budget as a homeowner, including property taxes, utility bills, and inevitable repair and maintenance costs.
Mortgage pre-approval is an essential first step in budgeting as a first-time buyer. It helps you prepare for some surprise costs adequately and makes you confident that youre purchasing a home within your means. Applying for a mortgage pre-approval is a free service with enormous benefits, so take advantage of it.
Happy house hunting!
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Learn More About The Benefits Of Prequalification And Preapproval
As you look for a home, you may be asked to get prequalified or preapproved. Before you start, its important to understand the difference.
When you want to talk to a lender to establish a general range of home prices, you can get prequalified, which is simply a lenders estimate of what you could potentially borrow.
This can be completed easily and conveniently online, in person, or over the phone in just a few minutes with basic information like your income and expected down payment.
When you want to give yourself a competitive edge over other buyers in the market, you can get preapproved. Having a preapproval lets sellers know that you already qualify for the home financing which greatly increases your chance of having your offer selected.
Unlike prequalification, preapproval is a more specific estimate of what you could borrow from your lender and requires documents such as your W2, recent pay stubs, bank statements and tax returns.
The lender will then use these documents to determine exactly how much you can be preapproved to borrow.
Once youre preapproved, youll have 90 days to find a home you love. Then you can lock your rate and complete your application.
Whether you choose to get prequalified or preapproved, you will have a better sense of whats in your price range and can hunt for a house with confidence.
Other Documents You May Need To Provide
Most lenders will require these documents when you apply for a mortgage:
- 3-6 months of bank statements
- T1, T4 or T4A statements of income
- Notices of Assessment from the most recent income tax returns
- A valid drivers license or Canadian passport
- Divorce papers to use alimony or child support as qualifying income
- Gift letter, if funding your down payment with a financial gift from a relative
- Third-party bank statements, if someone else pays for a considerable amount of your debt, such as parents paying for your student loans
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How To Get Preapproved For A Mortgage And Why It Matters
Youve been searching online for just the right home, cruising neighborhoods looking for the thats it! house and picturing yourself on your shady new porch. You know theres plenty to do before you get to the really serious house hunting, but its hard to resist.
Hang on, youre almost there. Youve got to have one thing in hand before the fun begins: your preapproval letter.
Why Is It Important To Get Pre
Getting pre-approved for a mortgage gives a person bargaining power since they have mortgage financing already lined up and can therefore make an offer to the seller of a home in which they are interested. Otherwise the prospective buyer would have to go out and apply for a mortgage before making an offer and potentially lose the opportunity to bid on a home.
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Gather The Appropriate Documents
Lenders will want to verify your identity, credit history, employment history, income and financial assets to issue a preapproval. Theyll likely ask you to fill out a uniform residential loan application .
The 1003 application asks for your personal information, financial information and loan information, including
- Bank accounts, retirement and other accounts
- Any other assets you have
- Property you own
- Employer contact information
- Debts you owe or other liabilities
Your lender will also likely do a hard credit check, and may require additional documents based on your individual situation, such as pay stubs, tax returns or bank statements.
Im Preapproved Now What
Once youre preapproved, keep a close eye on your finances until the entire mortgage process is complete. Any changes to your financial situation from the time youre preapproved to the date of your closing can impact your ability to finalize the loan.
- Avoid changes in income. Dont quit or change jobs in this timeframe.
- Avoid accumulating new debt. Now is not the time to buy a new car or finance living room furniture.
- Make payments on time. Late or missed payments affect your credit score, and a lower credit score might affect your mortgage eligibility.
- Stay in touch with your lender. Keep your lender in the loop when youre ready to make an offer on a property, especially if any numbers have changed since you last spoke.
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Consider Locking In Your Rate
Usually, you can apply for whats called a mortgage rate lock a guarantee from a lender to honor a specified interest rate for a set period once a seller accepts your offer.
Some lenders will let you lock in a rate once youve been preapproved, although you may need to pay a fee to extend the rate lock if it expires before you buy a home.
Im Really Good With My Money And Ive Already Estimated My Home Buying Budget Do I Still Need To Get Preapproved
To make a long story short: Yes.
Maybe youre the type of person who keeps really great track of your finances. You know your credit score, monthly expenses, and the balance on your student loans down to the cent.
Given how on top of your financial situation you are, you might think you can accurately estimate how much you can afford for a home. Why bother with a preapproval when youve already got a handle on your money, right?
Well, not so much. Being financially savvy is super helpful in the homebuying process. But you can only go so far on your own.
Its easy to make assumptions about loan amounts and payments. But there are many factors that go into a mortgage approval, including your income, credit history, and your debt-to-income ratio . All of these factors, plus how much of a down payment you plan to make, affect your preapproval amount.
So if youve estimated your homebuying budget based on your income, the guesses youve made might not be correct. Your best bet is to get preapproved and find out how much you can really afford.
For example, any one of the following things can change your approval.
- Mortgage rate
- Your perceived income versus what the lender can count toward qualifying income
Its impossible to know every rule within the 1,000+ page rule books that lenders use to approve your loan. Confidence only comes from having the lender look at your complete situation.
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How Do I Get Preapproved For A Mortgage
Because its the first step toward qualifying for a mortgage, preapproval might seem daunting or like a hassle. But with a little bit of proactive organization, it can be a lot easier than youd think.
In fact, you dont need anything on-hand to get started. A simple 15 minute conversation, and a lender can tell you how you look initially, and the documents you need to submit.
But if youre the kind of person who likes to prepare, heres what it takes:
Home Loans Preapproval Checklist
- A drivers license or U.S. passport
- A Social Security number or card. If not a U.S. citizen, a copy of the front and back of your green card
- Verification of employment
- Copy of their credit reports from the three national credit bureaus
- Recent pay stubs covering the last 30 days
- W-2 forms from the previous two years
- Proof of any additional income
- Last two years of personal federal income tax returns with all pages and schedules. If self-employed, last two years of individual federal income tax returns with all pages and schedules, as well as a business license, a year-to-date profit and loss statement , a balance sheet, and a signed CPA letter stating you are still in business
- Bank account statements proving that you have enough to cover the down payment and closing costs. If someone is helping you with the down payment, a gift letter stating that the fund is a gift and not an IOU
- Last quarterly statements for asset accounts , IRA, stock accounts, mutual funds)
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Documents Required To Get A Mortgage Pre
While the process of getting pre-approved might seem like an intimidating task it is actually not that hard, as long as you have all the right documentation and information. In Canada, the bank requires this information from you.
- Identification in the form of a photo I.D.
- Name, address, telephone number of your solicitor/notary
- Proof of employment, salary and the amount of time youve been employed
- Bank account information and any information on other investments you might have
- Confirmation of your down payment
- Information on your assets: vehicles, investments, other property that you might own
- Information on all of you liabilities: credit card balances, lines of credit, car loans, student loans
Check Your Credit Before Getting Preapproved
Well before you begin the homebuying processideally six months to a year before you seek mortgage preapproval or apply for a mortgageit’s wise to check your credit report and credit scores to know where you stand, and to give you time to clear up any credit issues that might prevent your credit scores from being the best they can be when you’re ready to buy your new home.
Mortgage preapproval can give you an important strategic advantage when you’re buying a home in today’s red-hot real estate markets. Correct timing of your preapproval application is an important tactic in your homebuying game plan.
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Sets Your Budget Accurately
Pre-approvals don’t only show the maximum loan amount you get approved for. They also come with an itemized estimate of your interest rate, monthly payment, and closing costs.
This estimate lets you know how much down payment you need, if you need any at all, and will help you narrow down your budget, making it easier to choose what homes you want to see in person.
Can I Get Mortgage Pre
Its unlikely. Initial qualification without a full credit check may be possible with some lenders at that point, they may be interested simply in whether you have both the income to pay back a mortgage and no credit red flags. But to get full-scale pre-approval will likely require a credit check.
Its important to know how long pre-qualification and pre-approval will be in effect. Different lenders assign different times for which their letters of pre-qualification or pre-approval are good, from 30 to as many as 120 days.
Remember that multiple checks for credit history can negatively affect your credit rating, so you dont want to have them repeated often. For the same reason, you shouldnt apply for it until youre ready to start seriously home shopping. Many lenders and real estate agents can help you get a range of what you can afford in a general sense, so that you can avoid going through the pre-qualification or pre-approval process only to learn that theres nothing in your market that you can realistically afford or want.
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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.
The Buyer Lost Income Or Piled On Debt
A home buyers ability to repay its mortgage gets based on Debt-to-Income. DTI is the amount of debt a buyer has compared to their income.
Mortgage approvals cap a buyers debt-to-income ratio near 50 percent.
If the buyers debt rises but their income stays the same, the pre-approval may get revoked at the point of purchase.
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Receive Your Mortgage Preapproval Letter
When you get preapproved, you usually get a preapproval letter. There are a few reasons the preapproval letter is important. First, real estate agents typically want to see your preapproval letter before they show you houses. This ensures they dont waste time showing you homes outside your budget.
Second, the preapproval letter is something you can share with the homes seller when you make an offer. It shows you wont have problems getting financed for the amount youre offering.
How To Get A Mortgage Pre
Before you start house-hunting, first you need a mortgage pre-approval. It might sound a little backwards but theres a reason you need one before you do anything else. Applying for a mortgage pre-approval is like asking your lender to go steady. Its kind of a big deal. If you want a mortgage lender to swipe right on your application then you need to make sure you are mortgage material. But what is a mortgage pre-approval, why is it important, and how do you get one? Heres everything you need to know about mortgage pre-approvals in Canada so you can snag your dream home and live happily mortgaged.
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The Buyers Credit Score Dropped Below The Minimum
Mortgage pre-approvals are test runs for a buyers actual mortgage approval. So, if the buyers credit score drops before finding a home, the buyers pre-approval may be invalidated.
In general, the minimum credit score requirements are:
- FHA: 500 credit score
Learn more about how to fix your credit score to buy a home.
How Long Does A Pre
A mortgage pre-approval typically lasts between 60 and 90 days. Because your financial situation and the market could change, approval letters dont last forever. If your offer isnt accepted, you might need to get pre-approved again.
The expiration date for your pre-approval should be indicated somewhere on your pre-approval letter. You can find this date on the first page of your Credible pre-approval letter.
If you need to make changes to your streamlined pre-approval letter , you can go to your dashboard and update the information, and well generate a new letter for you.
If youre serious about buying a home, youll want to get pre-approved. Not only will a pre-approval inform you of the mortgage loan you qualify for, it also gives you an advantage over other buyers and makes the entire homebuying process a lot less stressful.
Find a great agent today
- 90,000+ agents nationwide: Credible has partnered with large networks across the U.S. to give you access to agents that specialize in your market.
- Dont pay us a dime: Our agent network partners receive a commission from your real estate agent at closing.
- Personalized recommendation: Your agent recommendation is based on data from local real estate sales and is personalized to your situation.
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