Getting preapproved to buy a home is essential to the process. But the good news is that it can be seamless and pain-free.
Let’s discuss the benefits of getting preapproved for a mortgage and how to do so.
We’ll also share how you can prepare for the approval process and get in touch with an experienced loan officer from one of the most-trusted mortgage lenders.
What is a mortgage preapproval?
A mortgage preapproval is when a lending agency reviews your financials and provides a letter stating how much of a mortgage loan you qualify for.
Preapproval provides you peace of mind as you move forward in your home-buying journey and stands out to sellers. It shows them that you can qualify for financing and are less likely to back out of a deal due to financing.
While it’s not guaranteed because it’s not an official loan commitment, a preapproval letter provides the security of financing for a mortgage loan and shows sellers what you’re likely to qualify for.
The mortgage preapproval process
To get preapproved to buy a home, contact a trusted mortgage lender and submit all required documentation. You can also talk to multiple lenders to see which ones will offer terms that work for you.
If you got preapproved for a mortgage by a specific lender, you can still work with another one—you’re not locked into the lender that preapproved you. You’ll just have to go through the approval process again with the lender you choose.
This can vary depending on your mortgage lender, but you can expect to produce the following:
- Valid identification, like your driver’s license and social security card
- Proof of income
- Federal tax returns from the prior two years
- Bank statements
- Pay stubs
- Any other assets you may have
- Employer information
- Debt history
Your lender will likely run a credit check, to check your credit score and history. So be sure you meet your lender’s requirements or work to meet them before you apply.
They’ll also review your debt-to-income ratio, aka your DTI. Your DTI compares your combined debt to your income to break down how well you’ve been able to manage your debt and if you can handle another payment.
Check your mortgage optionsWhen should I get preapproved for a mortgage?
When you start the preapproval process depends on various factors, like your financial situation and your timeline.
I recommend starting with a mortgage payment calculator to provide the first step in your research of buying a home.
This calculator helps buyers understand how much a monthly mortgage payment will cost them.
It’s a great starting point because you can assess your financial situation to see if you’re prepared to take on more monthly payments.
Ideally, you’ll want to ensure your debt is under control; you should aim to have a healthy debt-to-income ratio. It may be beneficial to pay off your more significant debt before taking on a mortgage so that you’re not at risk of foreclosure due to any unforeseen circumstances.
You should also consider how much the down payment will cost. A down payment is the percentage of the home that you pay up-front. You can spend less on your monthly mortgage payments if you can put more down.
You should also check out how the housing market is doing before you begin the preapproval process.
The housing market is one of the determining factors in the underwriting process and in determining your interest rate.
It would be beneficial to check out the market value for the area you’re looking at and the average interest rates to gain insight into how this will affect your preapproval.
Why should I get preapproved?
A mortgage preapproval letter will help you along your homebuying journey. While not technically a requirement, it’s harder to get a seller to consider your offer without one.
Save time
You’ll undergo an approval process when you’re ready to purchase your dream home. This process can take time as it depends on several factors, gathering documentation and reviewing your scenario being two of the most significant factors.
If you’re preapproved, you’ll still have to go through the approval process, but as you’ve already provided your documentation, the process will likely be smoother and quicker. This can save you a tremendous amount of time and get you into your dream home sooner rather than later.
Save money
A preapproval will outline the loan amount you’d likely be approved for. While you may want to start shopping for a home, you can save money and emotional expense by knowing precisely what you can afford. Finding a home that you love but can’t afford would be heartwrenching.
Ensures confidence
As we’ve already discussed, having a preapproval letter will ensure financial security for yourself and any seller. A pre-approval guarantees that you’ve been approved for a certain amount and provides insurance that you’re a credible buyer. This eliminates any fear for the seller.
Preparing for the approval process
The approval process includes many steps, so with any home purchase, it’s always better to prepare yourself for what to expect.
Once you’re preapproved to buy a home, you can expect the following:
- Shopping for and securing your home
- Applying for a mortgage
- Make an offer
- Underwriting
- Closing
Shopping for a home can be more fun than the remaining steps, but it can also take time. It’s helpful to clearly understand what you can afford and what’s available in the ideal area.
Once you’ve found your dream home, you’ll want to begin the approval process and apply for a mortgage.
You’ll then make an offer on the home. This next step can be broken down even further, as it involves a home appraisal, inspections, and finalizing your funding.
Once these conditions have been met and you have documentation from your lender, you and the seller will sign a purchase agreement.
To finalize your funding, an underwriting process will take place. Underwriters review the loan package, property, and credit report to ensure that you and the property meet the requirements of the loan you are applying for.
Once everything has been reviewed, you’ll either be approved or denied. The closing process will begin if you’re approved, which is the final step in your home-buying journey!
During this process, you’ll complete a final home walkthrough to ensure the prior owners have vacated the property and fulfilled any repairs that were mandatory in your purchase agreement.
Once you’ve walked through the home and ensured you want to purchase the house, you’ll sign and finalize all documentation at the closing meeting.
And voila—you’re now an official homeowner!
Get a mortgage preapproval from GO mortgage
If you’re interested in the types of mortgages that are available, or are ready to get preapproved to buy a home, then connect with GO mortgage today.
We offer flexible requirements, with low down payments, and various term length options.
Fill out our short questionnaire to get started.
Image by Oleksandr Pidvalnyi from Pixabay