Whether you’re getting ready to move up, move out of state, or buy a home for the first time, getting a mortgage pre-approval is the best move you can make in today’s housing market.
Mortgage rates dropped again with the news of the new covid variant, but they’re expected to rise again right along with inflation. Meanwhile, housing prices are still climbing, and homeowners are buying and selling amidst cash offers and bidding wars.
Getting a mortgage pre-approval sets you up for success no matter what kind of competition you face. With a mortgage pre-approval, you’ll know exactly how much you can afford. But more importantly, you’ll have the confidence that your loan is already approved!
What’s the Difference? Getting a Mortgage Pre-approved vs. Pre-qualified
A mortgage pre-approval is way ahead of getting pre-qualified for a mortgage. When you get your mortgage pre-approved, your mortgage lender has approved your home loan amount. To do so, the lender has reviewed all required documentation such as income, debt-to-income ratio, credit report, employment, investments, and bank account statements. For this reason, your mortgage lender gives you a formal letter of approval. Once you have an offer, underwriting can fund the loan immediately.
A pre-qualification is simpler but you run the risk of getting your loan rejected. At its core, a pre-qualification tells all interested parties that you’ll most likely for a certain amount. With a pre-qualification, the mortgage lender only requires a few pieces of general information such as your income and a current credit report. Since they don’t run all the numbers, you face the possibility that your loan won’t fund when the time comes.
When you find your dream home, the last thing you want is to watch your loan fall through after you’ve made a competitive offer. Start here.
How to Fast Track Your Mortgage Pre-approval
When you decide to get pre-approved for a mortgage, the mortgage lender does the extra work to verify your income, credit, and the documentation required for a home loan. After your mortgage is pre-approved, you’ll receive a mortgage pre-approval letter to present with every offer. As a buyer, you’ll be confident knowing that your loan is approved up to the maximum amount designated. What’s more, realtors and sellers will know that you’re a serious buyer who can close fast.
Step 1: Estimate how much you can afford.
Use a mortgage calculator to find out how much you can afford. The results will only be a ballpark figure, but it can help set expectations. Decide on your price range, then connect with a mortgage advisor to discuss your homeownership goals.
Step 2: Connect with a local mortgage advisor.
Talk with a mortgage advisor as soon as you’re thinking about getting a home loan. A local mortgage advisor will understand the unique challenges of the housing market in your specific area. An advisor can offer invaluable guidance regarding your loan options, and get your documentation moving quickly through to underwriting. A mortgage advisor is your greatest asset in the loan process, so be sure to work with someone who understands your goals. An advisor can start the mortgage pre-approval process right away while you start shopping for your next home.
Step 3: Download your free credit report.
You can download a free credit report once every 12 months. It’s a good idea to find out your credit score and check the report to see if any errors need attention. Your credit score will have a direct impact on the terms of your loan and your mortgage rate. By getting a free copy of your credit report early, you can resolve any errors ahead of time.
Step 4: Gather required documentation.
Ask your mortgage advisor for a quick list to help keep things on track. An experienced mortgage advisor will provide a checklist to follow and will make sure the process runs smoothly. Most mortgage lenders require similar documentation, with a few exceptions. Start gathering paperwork you’ll need to verify income and assets, employment information, bank statements, and tax returns.
- Identification such as a passport or driver’s license
- Employment verification
- Proof of income (e.g., pay stubs, W-2 statements, bonuses, alimony)
- Tax returns for the past two years
- Recent bank statements
- Investment account statements
If you’re self-employed or plan to qualify using non-standard income, your advisor can talk with you about additional information that will be required.
Step 5: Take your mortgage pre-approval letter & make competitive offers.
Typically, a qualified borrower can get a mortgage pre-approval letter in just a few days. Depending on your situation, it might take a bit longer, which is why it’s wise to start early.
Connect with a local mortgage advisor so you can make sure all your documentation is in order. If you have good credit and verifiable income, getting pre-approved for a mortgage is a quick process.
If you have a financial situation that is less common, getting pre-approved for a mortgage is even more important, so you aren’t faced with holdups when you’re ready to make an offer. A qualified mortgage advisor can keep things moving quickly.
Once you’ve got your mortgage pre-approval letter, it’s time to make those offers!
Getting pre-approved for your next mortgage is the best first step you can take, especially in today’s housing market. We can help get your loan pre-approved so you know exactly how much you can afford and make a competitive offer. Connect with a local mortgage advisor to get started. We’d love to help.