{"id":115154,"date":"2021-05-26T20:37:22","date_gmt":"2021-05-26T20:37:22","guid":{"rendered":"https:\/\/fin2me.com\/?p=115154"},"modified":"2021-05-26T20:37:22","modified_gmt":"2021-05-26T20:37:22","slug":"how-to-get-pre-approved-for-a-mortgage-and-why-its-a-must-right-now","status":"publish","type":"post","link":"https:\/\/fin2me.com\/economy\/how-to-get-pre-approved-for-a-mortgage-and-why-its-a-must-right-now\/","title":{"rendered":"How to get pre-approved for a mortgage (and why it\u2019s a must right now)"},"content":{"rendered":"

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\u00a0<\/strong>A mortgage pre-approval can give you a good idea of how much home you can afford, and also make your offer more desirable to sellers.<\/span> (<\/span>iStock<\/span>)<\/span><\/p>\n

Buying a home is an involved process, from choosing a neighborhood to calculating your budget and, of course, actually looking at properties. Knowing how to get pre-approved for a mortgage can make the whole process simpler.<\/p>\n

Think of it this way: You wouldn’t go grocery shopping without knowing how much cash you have in your wallet. Getting pre-approved for a mortgage means knowing how much money you likely have in your homebuying "wallet," saving you both time and heartache while shopping around.<\/p>\n

Having a mortgage pre-approval can also make you a more desirable buyer, which is important in a competitive real estate market. If you’ve ever had a cashier help someone else while you searched for your debit card, you’ll understand why sellers prefer buyers who are already pre-approved for a mortgage loan.<\/p>\n

Here’s what to know about getting pre-approved for a mortgage before buying your next home.<\/p>\n

What is mortgage pre-approval?<\/h2>\n

A mortgage pre-approval is simply an offer from a mortgage lender saying they’re willing to loan you a certain amount of money for a new home purchase, provided you meet all their conditions for borrowing. This offer is meant to be an accurate indication of how much you can afford to borrow, since the lender will first look at important qualifying information such as your current assets, income, and credit reports\/score.<\/p>\n

But be aware: While a mortgage pre-approval is more precise than a prequalification, it’s not a guarantee that you’ll get a loan from that lender when all is said and done.<\/p>\n

Depending on the home you choose and whether you meet those aforementioned borrowing conditions, the lender can decide not to give you a mortgage when you actually apply for one.  However, getting a mortgage pre-approval is generally a good indication that you can be approved for a certain loan amount.<\/p>\n

With Credible, you can compare rates, research how much home you can afford and generate a streamlined pre-approval letter in minutes.<\/p>\n

Pre-approval vs. prequalification<\/h3>\n

A mortgage prequalification is a very quick and limited process. Generally, a lender will ask some questions about your personal finances — such as your household income, monthly expenses, current debt, etc. — to give you a rough idea of the mortgage loan type and amount that is ideal for you.<\/p>\n

Prequalifications don’t usually involve a true credit check, also known as a hard inquiry, and can often be completed online in just a few minutes. In some cases, you can even be prequalified for a mortgage loan from a lender you’ve never even spoken with. <\/p>\n

Pre-approval, on the other hand, takes the process up a notch, and is really the next-best thing to having an official mortgage loan contract in hand. <\/p>\n

In order to offer you a pre-approval, a lender will usually begin the actual underwriting process. This involves filling out a mortgage application and speaking with a loan officer. A credit check will be run for you and your co-borrower (if you have one), and you will usually be required to provide certain documentation such as pay stubs, tax returns, and bank statements.<\/p>\n

Pre-approval vs. approval<\/h3>\n

While a mortgage pre-approval is a great thing to have in-hand when shopping for a home, it’s not the final step. You’ll still need a mortgage loan approval in order to actually buy.<\/p>\n

Getting approved for a mortgage is a bit more involved.<\/p>\n

If you’ve been pre-approved for a home loan, your mortgage advisor will already have most of the documentation that’s needed for the rest of the mortgage underwriting process, such as financial statements and your completed application. <\/p>\n

Why mortgage pre-approval is important<\/h2>\n

As you can see from everything we mentioned above, mortgage pre-approval is a pretty valuable part of the homebuying process.<\/p>\n

First, it gives you a better idea of your borrowing power and how much home you can actually afford to buy. This may help you avoid falling in love with a home you won’t be approved for, or buying a house that your budget doesn’t realistically support.<\/p>\n

Additionally, your real estate agent might even require a pre-approval letter. Since it gives you an edge over buyers who are only prequalified, having this letter can be a critical difference in a seller’s market. A pre-approval can help reassure sellers that if they accept your offer, you’ll be more likely to be able to secure financing. <\/p>\n

HOW TO BUY A HOUSE IN 2021: 8 TIPS FOR WINNING THE COVID HOMEBUYING SEASON<\/strong><\/p>\n

How to get pre-approved for a mortgage<\/h2>\n

Though mortgage pre-approval is more in-depth than prequalification, most lenders try to make the process as simple as possible.<\/p>\n

You’ll generally need to fill out a mortgage application first, after which you’ll be assigned to a mortgage underwriter. They’ll let you know what sort of paperwork is needed, look over your provided documentation, run a credit check, and walk you through the process.<\/p>\n

Ideally, you’ll want to shop around a bit, even during the lender pre-approval process. That way, you can compare lenders, choose a rate that works for you, and you may find that one lender is able to pre-approve you faster than others.<\/p>\n

What are lender requirements for pre-approval?<\/h3>\n

You’ll need to provide a number of documents to your lender in order to get a mortgage pre-approval letter. These usually include:<\/p>\n