What is mortgage pre-approval?
To be pre-approved for a mortgage means that a lender has looked at your credit and financial history and determined that you would be eligible for a mortgage. A pre-approval generally is a written statement from a lender stating that a borrower would qualify for a certain loan amount. Most pre-approval letters are good for 60 to 90 days.
How do I get pre-approved?
To get pre-approved, you will need to complete an official mortgage application and provide the lender with the necessary documentation to perform an analysis of your credit and take an in-depth look at your financial background. Some of these documents include:
- Proof of employment
- Proof of income
- Tax documentation
- Place of residence
- Bank account statements
- Credit information
- Monthly expenses
Is pre-qualification enough?
Pre-qualification is different than pre-approval. A mortgage pre-qualification is an estimate of how much the lender thinks you could be eligible to borrow based on your basic financial information. So no, pre-qualification is not enough. Pre-qualification can help give you an idea of how much you might be able to borrow, but errors on your credit report and other issues can get in the way of that. The lender is only showing you the loan that they believe you could be approved for if everything checks out. Pre-approval is much more involved than pre-qualification and gives you a more solid figure.
Why should I get pre-approved?
Getting pre-approved for a specific loan amount will give you a more accurate idea of how much home you can afford. It can also make your offer more attractive to sellers because he or she will know you are only a few steps away from obtaining an actual mortgage. Pre-approval can also help speed up the underwriting and loan process, which will save you time once you have found your dream home and are ready to buy.
Does pre-approval guarantee a mortgage?
No. Pre-approval does not mean that you are guaranteed a mortgage. If your financial situation changes or if rates fluctuate before you make an offer on a home, you might not receive the same mortgage and rate that you were pre-approved for.
What if I don’t qualify for pre-approval?
If you didn’t qualify for pre-approval, don’t give up! Figure out why you didn’t qualify and what you can do to change that. There may be mistakes on your credit report and other issues you aren’t aware of, that could be preventing you from qualifying. It’s better to know about these things from the beginning, so you can work on fixing them before you find your dream home.