A Guide to Getting Pre-Approved for a Home Mortgage
Mortgage preapproval makes home buying super convenient. It cuts down on your stress level because you know that you have already got the approval and have an instant buyer’s market advantage.
Some people might be wondering what exactly preapproved mortgages are, so let’s start from the beginning. A pre-approved mortgage is a mortgage in which the borrower has been pre-approved for funding by a lender before purchasing it, and can be bought later with minimal hassle and paperwork whenever the borrower decides to go through with the purchase.
Preapproved loans can be obtained in two ways: through a lender that offers them or through your bank or credit union.
5 Things you need to have ready during the mortgage pre-approval process.
With the competitive real estate market, it has become essential for everyone hunting for a mortgage to prepare ahead. To get pre-approved for a mortgage, you should have some documents ready and meet the eligibility criteria. Let’s check these requirements in detail.
Proof of Income
In the United States, mortgage lenders require proof of income in order to qualify for a mortgage loan. If you don’t have either, this can lead to a hard time getting your home loan. It is required to check that you have enough income to pay the mortgage and still be able to afford the rest of your living expenses.
Having a good credit score is necessary to get pre-approved for a mortgage. Credit scores are determined by the three factors your debt history, the amount you owe, and how often you pay your bills on time. A higher credit score means that you are more likely to get approved for loans and mortgages, which will help keep your payments on time.
Proof of Assets
To qualify for a mortgage, you may need to provide your lender with proof that you have the financial resources necessary to repay the amount they are lending. One of the most common methods that lenders use is proof of assets. A lender can ask for a copy of your old bank statement, thorough checks on your credit score, and more.
Mortgage lenders often require borrowers to undergo employment verification. Make sure you have all the necessary employment-related documents, and payroll information handy. Plus, a verification from your employer can make a lot of difference.
Many mortgage lenders may ask for more documents than what is necessary to prove an applicant’s identity. This is to ensure that the person applying for the loan is indeed who they claim to be. One of these documents might be a driver’s license which some lenders may require as proof of identity.
Knowing what your lender asks for will help you avoid any surprises when applying for a loan from them. The reason why different mortgage lenders ask for different documentation is that they are trying to lower their risk in lending money to someone that may not be able to repay the debt on time.
Difference Between Mortgage Pre-Qualification and Pre-Approval
A pre-qualification is just for probing the creditworthiness of a borrower. It doesn’t mean that the borrower has been approved to take out a loan. A pre-approval, on the other hand, is when your lender determines whether they would approve your loan request with or without additional documents or approvals you might be asking for. The difference between these two mortgage terms is that pre-qualification is purely based on credit score and income, while pre-approval includes factors like debt-to-income ratio and liquidity, among others.
The mortgage pre-approval process gives you an idea of interest rates and how much money you could be borrowing. It also gives you a better understanding of your potential monthly mortgage payments. Drew Mortgage Associates, the providers of First Time Home Buyer Program, can help you with the easy and fast pre-mortgage approval with attractive interest rates. We are here to help you throughout the process and help you begin your home buying journey on a positive and happy note. Get in touch today!