Why do I need to get pre-approved and how do I do it?

Getting a mortgage preapproval is an important step in the home buying process. Most people think that when they want to buy a home, they immediately need to find an agent and get started. While this is mostly true, being pre-approved for a loan makes the buying process much quicker and more efficient. This can sound scary if you don’t know what everything means, but don’t worry. We are going to explain the process and provide you with all the tools, tips, and tricks you need to get pre-approved and buy that dream home as soon as possible!

What is a lender and what do they do?

A mortgage lender is someone who provides a potential buyer with the key to successfully closing on the property- the loan. In some cases, lenders market their services less than real estate agents, but this doesn’t make them any less important. A lender can provide potential buyers with a “pre-approval letter”, which can be the difference between “Accept” and “Decline” in an offer. From a sellers perspective, receiving an offer from someone who has a pre-approval letter offers a sort of “cushion”, if they accept the deal, there is less of a chance of it falling through versus someone who isn’t pre-approved.

Pre-approval letter and preparing for the process:

If you are ready to begin your search for that perfect house, get pre-approved from your lender. This shows your agent as well as the seller, that you’re serious about buying and provides them with an idea about how much you can afford. Preparing for that pre-approval letter is where you need to start. A potential buyer should obtain a copy of their credit report from three nation credit bureaus. Buyers will have the ability to save themselves as well as their lenders time if they can identify and correct any major errors and deficiencies in their credit history. Lenders differ in their time that they recommend reaching out to them before searching for a house. Some lenders recommend up to 12 months before, but this is usually based off the assumption that there will be needed changes in credit reports. Some documents that you will want to gather are:

• Copy of your Social Security card(s) – both people on the loan will need theirs.
• Employment W-2 forms from multiple years
• Recent statements for every bank/investment accounts
• Pay stubs
• Tax return from the last two years – minimum

Not all lenders are going to require all of these things, but it is nice to have them handy in case they do.

Selecting the perfect lender:

A first time buyer may think that all lenders are the same. While they do provide the same basic thing, money for property, they can also provide small differences that can make a huge impact on the buying process. This is why finding the right lender for you is important, everyone has different wants and needs so finding someone with the knowledge for your situation is the main goal. When searching for the perfect lender, reach out to friends and family in your area. Reach out to a local realtor who you may use. Getting recommendations from people in your area can be a good place to start. Look at your local lenders and read review, this is another good way to get a feel for who will fit your needs the best.

How long does it take to get pre-approved? How long do you stay approved?

Once all of the paperwork has been submitted to your lender, you should receive your offer within 3 business days. Although this process can be sped up if you use an online mortgage lender- you will know rather quickly if you have been approved or not and for how much. Once you receive your pre-approval letter, the time can vary for how long it will stay valid. Usually, mortgage pre-approvals are valid for 30 to 90 days before they expire.

Difference between “pre-approval” and “pre-qualification”:

You don’t want to get the two of these confused, they are very different. Pre-qualified simply means that you have a conversation with the lender or they reviewed your credit score. Pre-qualification doesn’t actually involve the retrieval of financial data, so it is impossible to identify red flags or address potential issues, so it doesn’t actually improve a buyers standpoint much.

What if I change my mind?

Just because you obtained a pre-qualification/pre-approval letter from a lender, there is no obligation to actually go through them when getting a loan. A potential buyer can actually change their mind and go with a different lender if that is what they want to do. Buyers don’t have any obligation to continue with the process until closing day when the papers are signed.

Get pre-approved and enjoy the home buying process!

House hunting can be tons of fun and stress free when you prepare for the process correctly. So, find the right lender and get pre-approved then find the right agent and start your house hunting journey!