Mortgage pre-approval and Mortgage prequalification process are used to determine if a borrower meets a lender’s requirements for a home loan. This should be the first thing every home buyer should do. Getting preapproved even before you give your realtor a call will surely avoid unnecessary heartbreak for you.
What is the difference between pre-approval and prequalified?
Mortgage Prequalification entails you providing a lender your financial details. It’ll help them make suggestions on the amount of mortgage you qualify for. While a mortgage pre-approval comes with a more detailed background check aimed at determining the specific mortgage amount you can approval for. This will also provide you with a clear picture of your possible mortgage interest rates will be.
How to go about your mortgage pre-approval process
The pre-approval process is very formal, you’ll have to complete an official mortgage application which usually requires an application fee. The application will require some necessary documents which will help the lender perform an extensive check on your credit rating and financial.
Here are some important documents required to complete the process:
- Proof of income: lenders will require proof of steady income from you, documents such as; pay stubs, tax return information, quarterly account statement including your checking, saving and investment accounts. Lenders will also ask for proof of additional income like alimony or bonuses.
- Asset declaration: lenders request your current bank statement and your investment account statement as evidence that you can afford the downpayment and closing costs on the prospective property.
- Credit information: A good credit score of 740 and above will earn you a low-interest rate. Check your credit score here. If you have a low credit profile, you may be required to pay more interest. You may also pay additional discount points to lower your rates.
- Proof of employment: your lender may want to call your employer to confirm that you are still underemployment and to check your salary and if you’ve recently changed jobs your lender might contact your previous employer. For those that are self-employed, you’ll need to provide additional information about your business and income.
- Other required documents: your lender may also request your social security number, driver’s license or state ID and your current residential address. Be cooperative with the requirements of your lender because it’ll make your whole application process go smoothly.
When you are done with the application process, the next step is to get the approval. Depending on the speed of your lender’s system it typically takes under 1 hour to get pre-approved.
If your application is not approved, don’t give, reapply. Shop around for other financial institutions and ensure you resolve the initial issue that caused you to be turned down. You need to build a flawless credit history meticulously. You can also check out the mortgage calculator to know your chances of approval.
Finally, the mortgage pre-approval and Pre-qualification process are easy; you just have to be prepared with the needed documents and cooperate with the lender to ensure you get the home you desire. With this done, you’ll be at an advantage when dealing with a potential seller. Also, you’ll be confident knowing what you can or can’t afford.
So even though it’s cool to shop for the home of your choice, you must start the process at a lender’s office instead of an open house. This shows how serious you are, get pre-approved now.