How to Get Preapproved for a Mortgage
Before starting your home search, it's essential to talk to a lender about getting pre-approved for a mortgage. This crucial step saves you time during negotiations and helps you focus on homes within your budget. But what exactly is a pre-approval, and how do you get one?
A pre-approval is more thorough than a pre-qualification. With a pre-qualification, the lender doesn’t pull your credit, so the amount they estimate could be off, especially if your credit is low. A pre-qualification may be enough if you're casually browsing, but if you're serious about buying, getting a pre-approval makes the entire process smoother.
How to Get Pre-Approved:
- Choose a Lender: Start by finding a reputable lender—whether it's a bank, credit union, or private lender. Ask for recommendations from friends, coworkers, or family.
- Submit Required Information: Once you’ve chosen a lender, you’ll need to provide:
- A mortgage application
- Permission for the lender to pull your credit
- Financial documents like pay stubs or W-2s
- Information on any outstanding debts, such as student loans, car loans, or credit cards
With this information, the lender can determine how much you’re approved to borrow and give you a pre-approval letter.
Why Pre-Approval Matters:
- Keeps Your Search Focused: A pre-approval letter gives you a clear budget, so your real estate agent can show you homes within your price range.
- Shows Sellers You're Serious: Including a pre-approval letter with your offer signals to sellers that you’re ready to move forward. In a competitive market, this can give you an edge over other buyers who may not be pre-approved.
What Happens Next:
Once your offer on a home is accepted, you’ll begin the full application process for the loan. At this stage, the lender will:
- Assess the appraised value of the home
- Ensure the home meets any required standards (some lenders require the property to meet certain habitability conditions)
- Conduct a more detailed review of your financial situation
By starting with a pre-approval, you streamline the buying process and boost your chances of getting your dream home.