How to Get Preapproved for a Home Loan
When you’re ready to buy a home, having a mortgage preapproval letter is essential. Without one, sellers are unlikely to take your offer seriously, especially if they have other eager buyers who are offering cash or able to offer their own preapproval letters as proof of their ability to obtain financing. As Experian explains, mortgage preapproval letters are typically good for 90 days, so you’ll want to take steps to get preapproved before you get serious about shopping for a home.
What a Mortgage Preapproval Is All About
As Credit Karma indicates, a mortgage preapproval is a lender’s tentative approval to grant you a home loan for a certain amount in the future. The approval is not a guarantee. In addition, it is granted with the assumption that the information you provided to receive the approval will stand up to further scrutiny and that you’ll find a suitable property to secure the home loan. The terms listed are subject to change, but the preapproval can help you convince sellers that you’re able to get financing. It also offers you a chance to have your finances reviewed before there’s an active sale so that any hidden issues can be found and corrected without time pressures. Plus, it provides a way to check your budget by seeing how much a lender is willing to lend you. Ultimately, knowing how to get preapproved for a home loan offers major advantages.
How Mortgage Preapproval Is Different from Mortgage Prequalification
When you ask about mortgage preapproval, you may also hear the term mortgage prequalification. In fact, some people will use the terms as if they were interchangeable. They really aren’t. My Mortgage Insider makes the difference clear:
- Mortgage preapprovals require documentation and credit checks. They allow lenders to offer a professional estimation of your borrowing power and build your reputation as a serious buyer with real estate professionals and sellers.
- Mortgage prequalifications are based on only what you say about your finances. With accurate reporting, they can help aspiring buyers who are trying to sort out their finances. However, they lack the weight of preapprovals because there is no evidence behind them.
How to Get a Mortgage Preapproval
What do you need to do to get a mortgage preapproval? While the process varies slightly from lender to lender, The Mortgage Reports provides a handy guide that offers an overview of the general process:
- The application: You’ll start the preapproval process by completing a home loan application. You can do this online, over the phone, or in person. Expect to provide your name, Social Security number, personal information, and financial information. Having this info handy will make the process go more smoothly. As part of the application process, you’ll also give your lender permission to pull your credit report from the major credit reporting bureaus.
- The documentation: To advance your application, you’ll need to provide your lender with documentation regarding your identity and finances. Requested documentation typically includes a driver’s license or photo ID, at least two years of W-2s, at least two years of tax returns, pay stubs, and statements from bank accounts, retirement accounts, and other asset accounts. Some lenders may be able to pull information directly from sources with your consent, but it’s best to have copies of the documentation ready to hand over.
- The underwriting: The underwriting is your lender’s task. During this phase, they’ll process what you’ve handed over. Be ready to respond to any questions or requests for additional information. However, your primary job now is waiting for an answer.
Do you have questions about how to get approved for a home loan? Are you ready to seek preapproval? Reach out to the loan experts at PrimeLending West Texas. We’re ready to assist you with all your home loan needs.