When To Get A Pre
Mortgage pre-approval letters are typically valid for 60 to 90 days. Lenders put an expiration date on these letters because your finances and credit profile could change. When a pre-approval expires, youll have to fill out a new mortgage application and submit updated paperwork to get another one.
If you’re just starting to think about buying a home and suspect you might have some difficulty getting a mortgage, going through the pre-approval process can help you identify credit issuesand potentially give you time to address them.
Seeking pre-approval six months to one year in advance of a serious home search puts you in a stronger position to improve your overall credit profile. You’ll also have more time to save money for a down payment and closing costs.
When you are ready to make offers, a seller often wants to see a mortgage pre-approval and, in some cases, proof of funds to show that youre a serious buyer. In many hot housing markets, sellers have an advantage because of intense buyer demand and a limited number of homes for sale they may be less likely to consider offers without pre-approval letters.
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Once the offer on your house is accepted, you can apply for a home loan. With Credible, you can easily complete the whole process online.
Getting pre-approved for a mortgage can make you a more desirable buyer, and can give you an idea of how much you can really afford to spend on a home, depending on your financial situation.
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What Is A Pre
A pre-approval is one of the very first steps in the home buying process and is intended to verify whether a potential buyer can qualify for a mortgage and how much they can afford to pay for a property between the mortgage they can qualify for and the down payment they can provide.
A pre-approval is not a guarantee that mortgage financing is approved, since there are still property specific criteria that must be considered once you have found a desired property, but when done properly it should provide a strong indication of how much mortgage you can qualify for and any potential obstacles that may stand in your way. This should give you the confidence and knowledge to shop the market and negotiate offers.
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Get A Prequalification Or Preapproval Letter
A prequalification or preapproval letter is a document from a lender stating that the lender is tentatively willing to lend to you, up to a certain loan amount.
This document is based on certain assumptions and it is not a guaranteed loan offer. But, it lets the seller know that you are likely to be able to get financing. Sellers frequently require a prequalification or preapproval letter before accepting your offer on a house.
What Documents Are Required For A Pre
The documents required for a pre-approval are situation specific, but generally can be broken down into 5 categories.
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How To Get Prequalified For A Mortgage
Jump start your home search with prequalification
Prequalification and preapproval are terms you hear during the home buying process. They sound similar but they are not quite the same. Both are a type of proof for real estate agents and home sellers that demonstrate you may qualify for a mortgage to buy a home.
Mortgage Prequalification Vs Preapproval Letters: Which One Has A Better Chance Of Getting The House
When it comes time to actually get a mortgage, mortgage prequalification vs preapproval letters are miles apart from each other, says Brian Blonder, Senior Vice President of Mortgage at Capital Bank, N.A. Pre-qualification speaks to someones general ability to execute the process of buying a home. Pre-approval is a commitment, with some contingencies, from a lending institution to give that person a home loan.
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What Documents Are Needed For A Mortgage Preapproval
- Pay stubs from at least the past 30 days Your current income is a major consideration in getting preapproved for a loan, so your lender wants to see that you have a reliable, predictable cash flow coming in.
- Federal income tax returns from the last two years These will help verify your employment history and show the lender a longer-term track record of your income.
- Bank statements from at least the past two months Lenders like to make sure all your money is accounted for, so they want to check your bank statements to see that there arent any major unexplained deposits or withdrawals that could affect your loan.
- Investment account statements Returns on your investments can count as income, and lenders need to know about all your sources of money, not just your day job.
- Documentation related to any gift funds youre receiving If a family member or friend is giving you money to help you buy a home, put together a document signed by them explaining the gift and the amount, and that the gift will not need to be repaid.
- ID (such as a drivers license or passport Lenders need to make sure they know who theyre giving their money to, so theyll want to verify your identity and that youre a U.S. citizen. Foreign nationals can get financing, but its much more complicated.
What To Do If You Cant Get Preapproved
If you cant get a preapproval, try to find out from the lender why you were denied. If its an issue you can remedy, like an error on your credit report thats causing the lender to reject your application, you can address that right away and seek a preapproval again when its resolved.
If you have too low of a credit score or other financial roadblocks preventing you from being preapproved, you can work to improve those areas, too. Raise your score by making payments on time and paying down your debt load, for example, or lower your debt ratio by finding a way to increase your income. Depending on your situation, this could take time, but itll go a long way.
Some lenders have very stringent qualifying criteria, so another option is to work with a different, more flexible lender. If youre an account holder with a local bank or member of a credit union, these institutions might be more willing to work with you to get you preapproved.
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What Is Mortgage Prequalification
Prequalification is an early step in your homebuying journey. When you prequalify for a home loan, youre getting an estimate of what you might be able to borrow, based on information you provide about your finances, as well as a credit check.
Prequalification is also an opportunity to learn about different mortgage options and work with your lender to identify the right fit for your needs and goals.
Everything A Homebuyer Needs To Get Pre
Bottom Line PersonalConsumer ReportsPrevention
As you search for a home, getting pre-approved for a mortgage can be an important step to take. Consulting with a lender and obtaining a pre-approval letter provides you with the opportunity to discuss loan options and budgeting with the lender this step can serve to clarify your total house-hunting budget and the monthly mortgage payment you can afford.
As a borrower, its important to know what a mortgage pre-approval does , and how to boost your chances of getting one.
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What Are Some Common Pitfalls To Avoid
One of the most common mistakes that inexperienced buyers make with regards to a pre-approval is to assume that all pre-approvals are the same. Since there is no official definition of a pre-approval, the word sometimes gets used to describe less rigorous processes than the one described above. Some mortgage professionals and bank specialists might do as little as get you to fill out an application and run some initial calculations before telling you that you are pre-approved. While these less robust processes may be quick, simple and easy, it’s important to remember that they don’t guarantee anything and are less reliable than a thorough documentation review.
Another common mistake is to assume that a pre-approval is the same thing as a commitment and that because you have been pre-approved, you don’t need to include a condition of financing in your offer to purchase. This assumption is false and can get you into a lot of trouble if you unconditionally commit yourself to purchase a property only to discover that the property itself doesn’t qualify to be mortgaged even though you were personally pre-approved.
The Importance Of Mortgage Pre
What you think you can afford and how much your lender is willing to give you can sometimes be very different. You want to make sure you have a full understanding of how much you are pre-approved for early in your home buying journey. Those with low credit scores, self-employment under three years or other kinds of debt may find it more challenging to get pre-approved for the amount they want.
Some realtors wont take you house hunting until you go through the pre-approval process, because you need to first know what you can borrow in order to look at houses in your price range. Getting pre-approved will help you narrow down your search and find a home that will work in your financial plan.
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How Long Does Prequalification Or Preapproval Take
Aside from their distinct roles in homebuying, prequalification and preapproval can take different amounts of time. Prequalifying at Bank of America is a quick process that can be done online, and you may get results within an hour. For mortgage preapproval, youll need to supply more information so the application is likely to take more time. You should receive your preapproval letter within 10 business days after youve provided all requested information.
What Is A Mortgage Pre
When you are pre-approved for a mortgage, it means a lender has determined how much you can borrow, the loan programs that you may qualify for, as well as the interest rate you qualify for. This assessment is based on things like credit score, income, debts, and employment history.
Youll generally get a written statement from a lender stating this information, which can be used to give sellers confidence that youll be approved for a loan after they accept your offer. Most pre-approval letters are good for 60 to 90 days.
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How Hard Is It To Pass A Fha Inspection
To pass an FHA inspection, however, your foundation must be free of significant cracks as well as ongoing water damage or evidence thereof. FHA inspectors look up as well as down. Your attic and roof need to be in good repair. An FHA inspection will require that you fix any water damage or holes in the roof.
How Do You Prequalify For A Mortgage
When you want to prequalify for a mortgage, you should expect to provide the following types of information:
- Assets and investments
If you are seeking preapproval, you may need to provide pay stubs, employment history, tax returns, credit history, outstanding bills, bank statements, and other financial documents.
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Budget For A Down Payment
The more money you can put down, the lower the interest rate and monthly payments will be. If you put down less than 20% of the homes purchase price, youll have to pay for private mortgage insurance on top of the cost of the home loan.
The type of mortgage you apply for will affect how much of a down payment youll need. For example, for most mortgages, youll need to put down 3% to 20%. But if you qualify for a Federal Housing Administration loan, you can put down just 3.5%.
Credibles monthly mortgage payment calculator makes this easy. Simply enter your loan information below to see how much youll pay monthly and over the life of the loan.
Enter your loan information to calculate how much you could pay
Checking rates wont affect your credit score.
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At True North Mortgage Your Pre
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- Easy and convenient â apply online, over the phone, through our chat, or at a store location
- Handled by a highly-trained broker for a better mortgage experience
- Kept on secure servers for your privacy
- Guaranteed to be your best interest rate for up to 120 days
- Fast â our user-friendly short form takes only 9 minutes to complete
Our True North Mortgage Brokers are knowledgeable, friendly and easy to get a hold of â real people who care about getting your best mortgage fit.
To start the process, you’ll need to provide accurate information and supporting documentation, and we’ll walk you through the rest.
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 inquiry, and may require additional documents based on your individual situation, such as pay stubs, tax returns or bank statements.
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Selecting A Mortgage Lender
A first-time home buyer understandably might assume that all mortgage lenders offer the same thing: money to purchase a house. After all, mortgage lending is a competitive industry in which individual lendersespecially on the local levelrarely differentiate themselves in a publicly visible way.
Now that several large, national mortgage lenders have shifted the preapproval process online, buyers may feel tempted to proceed with the fastest or least-invasive option. Yet, small differences in mortgage lenders can help to avoid regrettable decisions and even secure meaningful savings over the long term.
A good mortgage lenders preapproval letter should carry significant weight with the real estate agent responsible for the property that the buyer most desires. The lender essentially builds this credibility through strong customer service. In this context, that means asking questions about why youre interested in homes at a particular price point, what monthly payment your budget can absorb and what else you may need your savings for.
Any lender can quickly preapprove a buyer for the maximum amount that their company permits based on certain variables. A listing agent will have learned over time, though, that these lenders customers are more likely to encounter issues before closing. This is one reason why real estate agents are a good source for finding a lender.
Preparing For The Preapproval Process
Before contacting a lender, buyers should visit AnnualCreditReport.com to obtain a free copy of their credit reports from the three national credit bureaus . Buyers can save both themselves and their lenders some time if they can identifyand attempt to correctany errors or major deficiencies in their credit history. Some mortgage lenders recommend reaching out to them as early as 12 months before a buyer plans to buy a home for these same reasons.
Reaching out to a lender 12 months in advance may seem too early, says Christopher Jordan, branch manager for Main Street Home Loans in Silver Spring, Maryland. But if theres anything you need to work on, it gives us time to prepare. A credit issue may take four to six months to fix, and we want to make sure that we build enough time into the purchase process.
The extra time also comes in handy for gathering the financial documents a lender needs to issue the preapproval letter. The list can be long. In many cases, the buyer may not have looked at or accessed the files in years. Heres a sampling of the paperwork that a buyer may need to provide:
- Copy of your Social Security card
- Employment W-2 forms from multiple years
- Pay stubs
- Recent statements for every bank and investment account
- Tax returns from at least the past two years
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