What Is a Pre-Approved Mortgage?
In a hot real estate market, it’s not particularly difficult to receive an offer on a property, but it can still be difficult to actually close on the property. This is because it has become increasingly difficult for buyers to obtain mortgages since the introduction of recent mortgage eligibly and qualification changes.
Many realtors and real estate agents like to work with buyers who have been pre-approved for a loan. A pre-approved mortgage has become more popular in recent years as a way to show realtors and property sellers that a buyer is not only mentally prepared but also financially able to make the purchase. It has become common for many home buyers to apply for and obtain pre-approval before they begin shopping for a home – in fact, it’s prudent to do so. Getting pre-approved for a mortgage as your first step is beneficial for many reasons. First, it provides a better sense of the amount you’ll be able to borrow and what your price range will be. This, in turn, grants you more confidence when making an offer and provides sellers with more confidence when accepting an offer.
Obtaining pre-approval for a mortgage is similar to the initial stages of obtaining a traditional mortgage. A lender will look at your financial information, including your income, debt-to-income ratio, financial history, credit score and a number of other financial indicators. After analyzing your information, the lender will present you with a pre-approval letter with the amount they’re willing to loan. These letters generally expire after a set period, but can last anywhere between 30 and 120 days. Obtaining an offer from a lender doesn’t mean you’re required to use that lender for your loan. It’s a good idea to shop around to get the very best offer for you. Before beginning the pre-approval process, start by gathering all of your financial information, including tax statements, pay stubs, investment history and recent bank statements. Lenders will use all of these to help determine the pre-approval amount.
Remember that you may obtain quotes from more than one lender. Always keep an eye on your credit score. In the very early stages of buying a home, you should investigate your credit rating and find out how to improve it, if necessary. A higher credit score often helps secure a larger pre-approved amount. Once you have a pre-approved mortgage, your home buying experience will become a little easier.