Before you begin looking for a home, get pre-approved for a mortgage so you know what your budget will be, and so that are ready to make a competitive offer.
Keep reading to find out why pre-approval is important, and how to get pre-approved for a mortgage.
What is Mortgage Pre-Approval?
A mortgage pre-approval is the process of determining how much a lender will allow you to borrow to buy a home. By looking at your credit score, assets, and employment and income history, a loan officer will be able to tell you what you will likely be able to borrow.
Why Get Pre-Approved for a Mortgage?
Some people want to wait to get pre-approved for a mortgage until they have started to look for houses. In a buyer’s market, this might not be an issue.
However, in a seller’s market like we have seen for the past couple of years, and like we anticipate for the remainder of 2022, looking for a home without pre-approval usually means a lot of disappointment. Many agents will decline to work with you without a letter of pre-approval because it is so likely to be a waste of time. Without the ability to make competitive offers and view homes that are realistic potential homes, shopping for a home will be a stressful process.
When you get pre-approved for a mortgage before shopping, there are two major benefits:
- You will know your budget. The budget you think makes sense and the budget your lender will give you may differ. Your interest rate will be one of the most significant factors determining the loan amount you will be pre-approved for, and the only way to find out what it will be is to have a loan officer review your financial health through a look at your credit score, income, assets, and more.
- You won’t have to wait to put in an offer. In a real estate market like we are seeing right now, many properties are receiving multiple offers within days of listing. If you see a home you would like to put an offer on and have to wait to do so until you get pre-approved for a mortgage, it is likely that your offer will be too late. Make sure you do things in the right order to avoid wasted time and an emotional roller coaster.
How to Get Pre-Approved for a Mortgage?
Getting pre-approved for a mortgage is easier than you may think. It should not take much of your time, and gives you a completely essential tool for the home buying process.
1. Contact a loan officer
The first step to get pre-approved for a mortgage is to contact a loan officer. Don’t worry about being fully prepared with all your documentation at the first phone call. Your loan officer will let you know what you need to provide and walk you through the pre-approval process.
2. Provide documentation
Your loan officer will ask you questions about your income and assets, and will pull your credit score. While this credit pull will bring the score down minimally, it’s an essential part of the process and is not something to worry about. Documentation your loan officer is likely to ask for might include:
- Last year’s W-2s and tax returns
- Recent pay stubs
- Bank statements for all assets
- Child support documentation
3. Get pre-approved and begin looking for a home
After getting your pre-approval, you will know what your house shopping budget is. Provide this information to your agent and begin shopping for a home.
Don’t forget to make note of when the pre-approval expires. 60-90 days is a standard expiration time period for mortgage pre-approval, so if you haven’t had an offer accepted in that time or whatever is stipulated on your pre-approval letter, anticipate going through the pre-approval process again.
For more information about buying a home, contact us today! We have a team of friendly and knowledgeable professionals who would love to help you.
More Great Tips for Buyers:
5 Benefits of Buying a House with Good Credit
The Most Important Steps Toward Buying Your First Home
First Time Homebuyer Mistakes to Avoid
