Please ensure Javascript is enabled for purposes of website accessibility

1 Crucial Fact People Get Wrong With Mortgages

By Nathan Hamilton - Mar 4, 2017 at 10:03AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Getting the right details could help you pay less for your mortgage

mortgage help

Credit: Getty Images

No doubt the Internet is packed with valuable information about mortgage guidance, tips, and education. People need only type a few words into their search browsers to instantly have a wealth of information at their fingertips or to find a low mortgage rate.

But the truth is, some essentials are overlooked, leaving people without crucial details to make an informed decision. With that in mind, Motley Fool analysts, Kristine Hartjes and Nathan Hamilton, discuss in the video below one mortgage essential homebuyers may get wrong or may be confused about. 


We have information ready all the time at our fingertips via the internet about just about anything, so when you're looking up information about something like mortgages, your options are endless. And there's so much information out there. A lot of it is good. Some of it's not great...




...and so we're here, today, to try to protect all of our Foolish listeners from this salty information. To get you the best possible information about mortgages. So we're going to kick this one off with one crucial fact that people get wrong when it comes to mortgages.


And it's just a matter of diving a little bit deeper and understanding what is actually happening with this process. One thing that people get wrong is a mortgage pre-qualification versus a mortgage pre-approval.


OK, they sound similar.


They do. They start with the same three letters ­— put it that way ­— but they're far different for everything else. A pre-qualification is really just dipping your toes in. It's a very soft inquiry with a mortgage lender that says, "How much could I potentially borrow? What would my rate possibly be?"

But if you're looking to close quickly on a home ­— if you're in a market where it's a seller's market, there's competition, and maybe people are paying cash for houses ­— you need to get pre-approved beforehand, and what that does is it shows the seller that "I've actually gone through the whole approval process. They've checked my credit scores. They've pulled my W-2s. They've looked at all the information out there. I'm qualified on paper. I can sign for this amount at this rate, and if we do close, I can have my funds available in this time frame."


What is that time frame, typically?


With a pre-approval, generally it's going to be about 90 days.


And it seems like a pretty rigorous process to get pre-approved...



KRISTINE HARJES: important one, but one that involves lots of documentation. What do you need to have ready?


We'll run through the list, here, and essentially there's a few things (about five line items) to look at. So proof of income. That tends to be your W-2s and about two years of tax statements. And then proof of assets ­— your cash, bank account statements. If there's money under your mattress, you're going to need to prove where that came from. If it was a gift, not a gift, anything. There needs to be documentation for all of this.

And then you're also going to need to provide your credit score, which they'll pull for you, and that's, of course, why you do want to give some attention to make sure that there aren't any errors [and] there aren't any unknowns when you are going through the process.

The other part is employment verification. Lenders generally want to see some sort of stable job history. And the last is your ID and social security number.


Great. As you mentioned credit score, that is one really important component to this entire process. If you're looking for some tips on boosting your credit score, you can check out where we have a guide called "5 Tips to Increase Your Credit Score Over 800." While you're there, you can also get started with a pre-approval, or you can download any of our other free mortgage guides.


Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/25/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.