A mortgage pre-approval is an important first step in the home buying process that can save you both time and money. This process involves a mortgage lender reviewing your financial profile to determine how much money you are qualified to borrow to purchase a home.
The Benefits of a Mortgage Pre-Approval
One of the main benefits of a mortgage pre-approval is that it gives you a clear picture of your home buying budget. Knowing how much money you are qualified to borrow can help you narrow down your home search to properties in your price range. Knowing what price range you’re in will determine what your monthly mortgage payment will be which will help you account for your monthly expenses and aid in your future financial success.
Getting pre-approved gives you an advantage over other buyers when making an offer on a home. A pre-approved buyer is seen as more serious and financially stable than a buyer who has not been pre-approved. This will increase your chances of getting your offer accepted, especially if there are multiple offers on the property. Get a leg up on the competition by getting pre-approved as soon as possible.
A mortgage pre-approval can also save you time during the home buying process. Once you have been pre-approved, you can focus your search on homes that are within your budget. This can help you avoid wasting time looking at homes that you cannot afford.
How to Get Pre-Approved for a Mortgage
To get pre-approved for a mortgage, you will need to provide your lender with detailed information about your financial situation. This includes:
Income: Your lender will want to see proof of income, including your most recent 30 days of pay stubs and W-2s from the past two years. Lenders are looking for proof of stable and consistent income.
Credit Score: Your lender will order your credit report to check your credit score and review your credit history. Typically, the higher your credit score the more favorable your interest rate will be.
Debt: Your lender will want to know how much debt you have, including credit card debt, auto loans, student loans, mortgages, and more. The debts included in your debt to income ratio come from your credit report and are only for monthly liabilities that you’ve borrowed money for. Utilities, phone bills, cable, etc are not included in your debt to income ratio since you did not borrow money for these services.
Assets: Your lender will want to know about any assets you have, such as savings, investments, and retirement accounts to verify you have adequate funds to cover your down payment and closing costs and in some cases ample reserves after closing.
Once you have provided your lender with all of the necessary information, they will review your financial situation to determine how much money you are qualified to borrow. This process typically takes a few days to a week.
Once you have been pre-approved, your lender will provide you with a pre-approval letter. This letter will reflect the amount of money you are qualified to borrow, and it is important to keep it on hand when making offers on homes. Your real estate agent will want a copy of it so that they can give it to the listing agent along with the offer you submit once you’ve found a home you’d like to close on.
A mortgage pre-approval can save you both time and money during the home buying process. By knowing how much money you are qualified to borrow, you can focus your search on properties in your price range. A pre-approval will also increase your chances of being accepted when making an offer on a home. Talk to a loan officer today to see how much you qualify for!
