Mortgage preapproval is the process of determining how much money you can borrow to buy a home. Lenders look at your income, assets and credit score and determine what loans you could be approved for, how much you can borrow and what your interest rate might be.
A preapproval is helpful when you’re shopping for a home, but you’ll need to get a full approval once you find your home, and simply getting a preapproval before you start looking at properties doesn't guarantee you’ll get approved. For your lender, this process includes making sure the property details check out.
Here are a few property details your lender will need to approve:
Before you can get a home loan preapproval, work with your lender to verify your financial information and obtain a loan estimate. Let’s walk through each of the steps and review the parts of the process you’ll be responsible for.
The preapproval process is essentially a mortgage application. This means your lender or loan officer will want to take a comprehensive look at your finances. You should be prepared to provide information on the following:
Before starting the preapproval process, you'll want the necessary documentation to ensure the process goes smoothly. Here are a few items you should have on your mortgage preapproval checklist:
Once you’ve submitted all your information to the lender, you can expect to receive your loan estimate within 3 business days, though this may be much shorter if you use an online mortgage lender. The loan estimate will let you know whether you’ve been preapproved and for how much.
Preapproval isn’t just for your lender. Knowing how much mortgage you can expect to take out is also highly beneficial to you as a home buyer, and it can help you narrow down and focus on your best options.
That means the best time to get preapproved is at the start of your home buying journey. If you know you’re in the market for a new home, apply for preapproval early to get a picture of your mortgage options and show agents you’re a serious buyer.
Preapproval usually requires a hard inquiry into your credit. While this may cause your credit score to drop slightly, getting preapproved won’t hurt your credit in a significant way. Subsequent inquiries from other mortgage lenders within the same time period (usually about 45 days) won’t affect your score at all.
When you get preapproved, you usually get a preapproval letter. There are a few reasons the preapproval letter is important. First, real estate agents typically want to see your preapproval letter before they show you houses. This ensures they don’t waste time showing you homes outside your budget.
Second, the preapproval letter is something you can share with the home’s seller when you make an offer. It shows you won’t have problems getting financed for the amount you’re offering.
Preapproval doesn’t last forever. Check your expiration date and keep it in mind as you look at homes. Though it varies from lender to lender, preapproval is typically valid for 60 – 90 days. If you haven't settled on a house, you can request a renewal by giving your lender your most up-to-date financial and credit information.
If you’re looking to get approved for a mortgage, Billcutter can help.
Here’s how it works.
Our online application asks you a series of questions to evaluate your eligibility for a home loan. You’ll give us information about yourself, the home you want to buy, your income and your assets. From there, we’ll check your credit so we can offer you accurate mortgage solutions.
See your recommended mortgage solutions and adjust your numbers to fit your budget. This is where you’ll see how much we can approve you for, as well as recommended types of home loans, down payments, monthly payments and interest rates.
Once you’ve chosen your mortgage option, you can see if you’re approved for it. From there, we’ll give you a Prequalified Approval Letter that you can use to shop for homes.
