Demystifying the Mortgage Pre-Approval Process

When you start your homebuying journey, you need to determine your budget, where you want to live, the type of home you’re interested in, and who your real estate agent will be. However, getting preapproval for a loan should be the first thing you do. It’s not as in-depth or complicated as you may think it is. Here’s a straightforward gameplan for getting pre-approved.

Why Get Pre-Approved, You Ask?

Getting pre-approved for your mortgage gives you several advantages over other homebuyers who don’t take this step.

  • It shows you how much home you can afford.
  • It makes you look more serious to sellers.
  • It gives you a competitive edge in a bidding war.

Steps for Pre-Approval

To get pre-approved, follow these steps:

1: Collect your financial information.
The lender will want to see information about your income, employment status, assets (savings and stock accounts, for example), and debts. They’ll also need a way to verify your identity. Gather all these documents before your first meeting to make the process go faster.

2: Choose a lender.
A reputable, experienced mortgage lender is essential to making your purchasing process smooth and low stress. Ask around for recommendations, research lenders online, and find one that you’re comfortable working with.

3: Authorize a credit check.
Your lender will want to look at how you’ve managed your credit obligations in the past. Give written authorization for them to pull your credit reports from the three bureaus (Experian, Equifax and TransUnion). They will look at your payment history, debt load and overall credit health to help them determine if you’re low-risk, high-risk, or somewhere in between.

4: Discuss your options.
While you’re working on getting pre-approved, ask you lender what your mortgage loan options are. Can you qualify for the best rates? How much will you need to put toward a down payment? Knowing what to expect at this stage helps you navigate your home search with a more informed approach.

5: Secure a pre-approval letter.
Closely review your pre-approval letter to ensure it’s accurate. Once you have it in hand, present it to your real estate agent. You’ll need to use it once you put an offer on a house to show the seller you are serious and have the means to purchase the property.

6: Shop for your home immediately.
Pre-approvals don’t last forever. Lenders offer different lengths of pre-approvals that typically range from 60 to 90 days. If you haven’t found a home by then, you can go back to the lender and ask for a renewal. Just be prepared to send over updated financial information and allow them to pull your credit again.

Getting pre-approved for a mortgage loan is one of the smartest moves to make. Do it early in the process, so you know you’re financially able to secure a mortgage once you find the home of your dreams.