Shopping for a home can be challenging without knowing how much you can afford. Mortgage preapproval lets you shop smarter and make stronger offers. Let’s explore what mortgage preapproval means and how to get one.
A Mortgage Preapproval: What Is It?
Getting a mortgage preapproval lets you know how much you can borrow to purchase a house. Lenders review your income, assets, and credit report during this process. They use this information to calculate your interest rate, the maximum amount you can borrow, and any loans you might be eligible for.
Prequalification vs. Preapproval for a Home Loan
There are important distinctions between preapproval and prequalification, but both assist you in understanding the maximum loan amount you may be accepted for.
Prequalification
Less Detailed: Does not require a credit check and only needs a small amount of financial information.
Estimates: Provides ballpark figures for the loan amount, interest rate, and program.
No Documentation: Typically does not require proof of employment such as pay stubs and bank statements.
Preapproval
In-depth Review: Requires detailed financial information and a hard credit check.
Accurate Assessment: Provides a more precise loan amount, program, and interest rate.
Documentation Required: Often needs proof of employment and financial stability, including pay stubs, bank statements, and tax returns.
Benefits of a Mortgage Preapproval
Easier Shopping
Preapprovals make the house-hunting process easier by helping you and your real estate agent focus on homes within your budget.
Stronger Offers
A pre-approval can make your offer more attractive to sellers, indicating you’re a serious buyer who can secure financing.
Time to Sort Out Issues
Getting preapproved means handling much of the mortgage process upfront, allowing you to focus on moving once your offer is accepted.
How to Get Preapproved for a Mortgage
Here are the steps to get preapproved for a mortgage:
1. Collect Your Documentation
Prepare the following documents:
Tax returns
W-2 statements
Pay stubs
Bank statements
Driver’s license
Social Security number
2. Know When to Get Preapproved
The best time to get preapproved is at the start of your home-buying journey. Apply early to see your mortgage options and demonstrate to agents that you’re a serious buyer.
3. Get Your Credit Score Checked
Preapproval requires a hard inquiry into your credit. This may slightly lower your credit score, but subsequent inquiries from other mortgage lenders within 30 days won’t affect your score.
4. Receive Your Mortgage Preapproval Letter
A preapproval letter shows real estate agents and sellers that you can get financed for the amount you’ve offered. This letter is crucial in competitive markets.
5. Understand How Long Preapproval Lasts
Preapproval typically lasts for 60-90 days. If you haven’t found a home within this period, you can request a renewal by updating your financial and credit information.
The Bottom Line: Start Your Home Buying Journey with a Mortgage Preapproval
A mortgage preapproval is a great first step toward buying a home. Once your financial information is verified, you'll have a clear idea of how much home you can afford. Getting preapproved before you start your house hunt benefits everyone involved.
Apply online now with V Nation Corp to start your pre-approval process today.
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