Mortgage pre approval is the process by which a mortgage lender approves you for a specific loan amount before you even start searching for your dream home. This gives you an accurate idea of how much you can borrow and helps narrow down the list of potential houses that fit best within your budget.
How to Get Preapproved for a Mortgage
The initial step in receiving mortgage pre approval is finding a lender who offers it. Since lenders differ in qualifications and interest rates, research is essential before selecting one.
Mortgage preapproval can help you focus on house hunting and save you time, effort and money in the long run. It also makes you a more desirable buyer to sellers because it demonstrates your seriousness about buying their property and ability to back up your offer with enough funds for it.
How to Find a Lender for Mortgage Preapproval
In order to be approved for a mortgage, you must meet certain financial criteria. These include your credit score, income and debt-to-income ratio.
If your credit score is low or you have significant debt, it may take longer to obtain mortgage preapproval. To improve your odds of approval, make all of your payments on time and keep your debt ratio as low as possible.
Furthermore, strive to pay off as much debt as possible – particularly high-interest student and car loans. Doing this will give your lender a better idea of your affordability and lower your debt-to-income ratio – an important factor when applying for mortgage preapproval.
Maintaining a job with a regular salary and having savings accounts that cover 3-6 months worth of expenses are both essential. This will provide you with protection in case things don’t go according to plan, protecting you from losing your main source of income that could derail your mortgage application.
Once you’ve identified a lender offering mortgage preapproval, fill out all necessary paperwork and submit it to them. This could take anywhere from one to several days depending on the lender and your individual situation.
Once preapproved, you’ll receive a letter from the lender outlining the maximum loan amount they are willing to loan you. This letter usually expires after 60 or 90 days but you are always free to renew it at any point.
Renewing Your Mortgage Preapproval
To renew your mortgage preapproval for a mortgage, simply provide updated financial information to the lender. They will review these documents and run another credit check before issuing you another preapproval letter.
It’s wise to start the mortgage application process as soon as possible, giving yourself more time for house hunting and expediting the mortgage application process when you do find a place.
To guarantee you qualify for a mortgage, it’s best to get preapproved with an established lender in your local market. They have more insight into your circumstances and can make tailored recommendations based on those details.