Steps to Getting Mortgage Pre-Approval
by Christy Bieber | Updated July 19, 2021 - First published on April 14, 2021
Mortgage pre-approval is an important step to finding your new home. Read on to learn how to get pre-approved.
If you're shopping for a home, getting mortgage pre-approval is one of the very first things that you should do. Getting pre-approved means you submit your information to a mortgage lender who will assess your finances and determine if you qualify for the type of mortgage best suited for you.
Pre-approval is not an absolute guarantee of approval. But it does usually mean you will be able to borrow at the rate and terms your mortgage lender offers. For this to happen, your finances should stay the same, and the house you chose to buy must be valued highly enough.
Pre-approval is also important when you make an offer. Home sellers want to know you're pre-approved and likely able to get financing.
So how exactly do you get pre-approval? There are three steps you'll need to take.
1. Shop around among mortgage lenders
Generally, you only want to apply for pre-approval with a mortgage lender you're actually likely to get a loan from. That means you should shop around for mortgage rates and terms before you apply for it.
You should get quotes from no less than three lenders and ideally from as many as possible. That way, you can ensure you're getting the most favorable rates possible.
As you compare lenders, make sure you're assessing the big picture. Look at the interest rate you're being offered, fees you're being charged, and whether you have to pay mortgage points. And make sure you compare similar loan types. For example, don't compare a fixed-rate loan with an adjustable-rate mortgage, as these are two different types of loans.
2. Gather your financial documents
Getting pre-approved requires you to submit a lot of documents for a home loan application. That's because lenders do a thorough review of your finances before they grant you a loan. You should be prepared to provide proof of income such as tax returns and pay stubs.
Many lenders also want you to provide bank statements or other proof you'll be able to come up with a down payment. They'll also pull your credit report to see your credit score and the amount of debt you already have.
It can take time to get all these financial documents ready, so get started as you shop around for lenders.
3. Submit your application
Once you've found a lender offering the best loan terms, it's time to actually submit your request for pre-approval. Many lenders allow you to submit a mortgage application online now, although some do require you to visit a local branch in person or to speak with a mortgage loan officer.
You'll need to provide details about how much you want to borrow, as well as submitting the financial documentation that the lender asks for. You should be able to submit this digitally with most loan providers, especially if you opt to work with an online mortgage lender.
Once you've submitted your information, the lender will review it, which can take time. Then the lender will let you know how much you'll actually be preapproved to borrow and at which rates. You should have the choice to lock in your interest rate if you wish to do so. Also, you'll be provided with a pre-approval letter, which you can use when you submit an offer for a home.
After you've found a home, you can provide the rest of the details to your lender. This will hopefully move you forward toward closing on an affordable mortgage that's a good fit for your financial needs.
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