A mortgage preapproval is an acknowledgement form that details how much a lender will consider letting you lend to you. Some sellers require a mortgage preapproval before accepting your offer to buy a house. On the other hand, preapproval will give you an idea of what how much house you can afford. Basically, it’s a safe prediction of what your mortgage amount could be since it’s based on credit history data and employment data.
How Does Mortgage Preapproval Work?
Getting pre-approved for a mortgage is relatively a simple process. You can get pre-approved as soon as you are in the market for a home. Set up an appointment with a mortgage broker or fill out an online application. This application will require information about outstanding credit, monthly household income, etc. The mortgage broker will calculate this information, contact lenders on your behalf, then contact you with fore view options.
Why should I get a pre-approved mortgage?
There are many advantages when getting pre-approved for a mortgage:
- Starting with a pre-approval means you’ll have time to compare lenders instead of scrambling to satisfy the terms of a purchase contract after you make an offer. Being pre-approved doesn’t commit you to work with that lender, but it will make it faster to close on a loan since they’ll already have most of your paperwork on file.
- The biggest benefit of being pre-approved for a mortgage is knowing what kind of home you can afford. You can save a lot of time by eliminating houses outside of your price range, and the disappointment of falling in love with a house only to discover that you don’t qualify for the necessary loan amount.
- Having a pre-approval letter when you submit an offer on a home is a great negotiating tool. It means you’ll be able to close on a loan faster, which is usually very appealing to sellers. Plus, if a seller receives multiple offers, one with the pre-approval will be giving comfort of a future sale to the vendor.
- One thing to remember is mortgage pre-approvals generally expire 90 days after they’re written. This is because many things can change over the course of a couple of months such as your income, employment status, credit score, and even interest rates. Therefore, the lender will update your paperwork so you can continue to enjoy the benefits of being pre-approved.
- The process of looking for, and buying a home can sometimes feel overwhelming, but a pre-approval can make the process less stressful.
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