How To Get A Mortgage Preapproval

A mortgage preapproval is a crucial step to take in the home-buying process. With a mortgage preapproval, aspiring home buyers can more easily find, purchase, and finance this major investment.

One of the simplest ways to get mortgage preapproval is to learn about the preapproval process and prepare. We'll explain in further detail below.

What Is A Mortgage Preapproval?

If you want to know how to get preapproved for a mortgage, the first step is to understand what a mortgage preapproval is. A mortgage preapproval also referred to as a home loan preapproval, is when a lender deems an aspiring home buyer as a good fit for a loan.

The mortgage lender assesses the candidate's ability to pay for a home loan based on their financial history and determines whether they would approve them for a loan. When you get preapproved for a mortgage, you will receive a letter that outlines what you can afford in terms of the purchase price, interest rate, and down payment amount.

You can use the mortgage preapproval letter to show your real estate agent what values of homes you can afford. Additionally, you can use this letter when you bid on a house to prove that you can finance this considerable purchase.

The mortgage preapproval process is complicated and can be intimidating for new homebuyers and aspiring homeowners. However, home loan preapproval is also extremely important. It can help you successfully buy a home and stand out against other bidders and competition.

Mortgage Pre-Qualification vs. Preapproval: Know The Difference

Mortgage prequalification and mortgage preapproval often get mixed up, but they are not the same thing. A mortgage prequalification is like the first step that usually occurs before mortgage preapproval.

If you are interested in buying a home but are not sure if you are financially ready, you should begin with a mortgage prequalification as opposed to a mortgage preapproval. A mortgage prequalification is like a learner's permit while the mortgage preapproval is a driver's license.

A mortgage prequalification is a much more informal and low-risk process. You will tell a lender about your credit, debt, income, assets, and more for them to estimate if you would qualify for a loan and how much you would be able to theoretically borrow.

If you get a go-ahead from a mortgage lender during prequalification, your next step would be to apply to get a mortgage preapproval. However, please keep in mind that even if you get preapproved for a loan, this is not a guarantee that you'll receive a mortgage loan.

When To Get Started With Home Loan Preapproval

Getting started with home loan preapproval is often the most daunting aspect of the home-buying process. It is recommended that aspiring homebuyers start the mortgage preapproval process when they begin to shop around for homes.

Whether you are looking around at homes online or beginning to schedule showings, it's a good idea to apply for a mortgage preapproval. As soon as you are serious about buying property, you can start the mortgage preapproval process. Once you get preapproved, it'll make the search for the perfect home considerably easier.

How To Get Preapproved For A Mortgage In 5 Steps

If you want to get preapproved for a mortgage, there are some clear steps you can take to get started right away and get the job done. Listed below are the 5 steps for how to get preapproved for a mortgage:

• Check Your Credit – Your credit score is the first thing a mortgage lender, processor, or underwriter will look at to see if you're a good fit for a loan. Be sure to check your credit in advance to see assess the likelihood of getting preapproved or not.

If your credit score is in good shape, usually around 600 or over, you are in a good position. However, if your credit score is under 580, you'll probably need to make some changes to improve your credit score before you attempt to get preapproved.

• Gather All Necessary Documents – To get preapproved for a loan, your prospective lender will need to analyze your financial documents to see if you're a desirable candidate for a mortgage loan. Most lenders require the following documents:
  • Proof of income in the form of pay stubs or W-2 forms
  • Federal income tax returns from the past 2 years
  • A bank account statement showing current balance and/or the investment account statement showing contributions
  • Driver's license or other proof of identification
  • Debt statements to show outstanding balances on things like students loans and credit cards
• Connect With Multiple Lenders – Mortgage lenders are not one-size-fits-all. There are different types of mortgage lenders. Each mortgage lender offers different types of loans, rate options, and has a distinct focus area.

By connecting with multiple lenders, you can assess which lender is the best fit for your financial needs and goals. You should never commit to the first mortgage lender that you come into contact with. When you shop around for mortgage lenders, you can find the best fit lender for your unique finances.

• Limit Debt & Stay Current On Bills – Mortgage preapproval is heavily dependent on your ability to pay bills and pay off debt. Therefore, limiting your debt and staying on top of all your current bills is imperative to ensure that your application gets preapproved.

Make sure you have your debt and bills well taken care of before you get started with the preapproval process. With minimal debt and outstanding balances, you increase the likelihood that you will get preapproved for a mortgage significantly.

• Submit Loan Application – Once you have completed the steps listed above, congratulations! That means you are now ready to submit your loan application to get preapproved for a mortgage.

With a mortgage preapproval, you are going to stand out against the competition. You can use your mortgage preapproval to show that you are a serious, qualified potential buyer. You'll know exactly what you can afford to spend on a home and you have proof that a mortgage lender is willing to let you borrow to finance the purchase.

How Long Does a Mortgage Preapproval Last?

How long your mortgage preapproval lasts depends on the lender. Some mortgage lenders validate mortgage preapprovals for only 30 days; however, it is most common for a mortgage preapproval to last for 90 days.

If you need more time to find a home, don't worry. When your mortgage preapproval is no longer valid, you just need to request another mortgage preapproval letter. You can always request multiple mortgage preapproval letters over the course of your search.

Mortgage BPO services include Mortgage Processing Services, Mortgage Underwriting Services, and other services that help people successfully navigate the complex mortgage process from start to finish.