How to Get Pre-Approved for a Mortgage
So you’re ready to start house hunting and you’re thinking about the home loan you’ll need. But which should you do first: find your dream home or apply for a mortgage?
Neither—the first thing you should do is figure out how to get your home loan pre-approved! Pre-approval means you’ll have a clear idea of your budget and realtors and sellers will take you seriously as a buyer. Read on to find out how to get pre-approved for a mortgage.
Why You Need to Get Pre-Approved for Your Mortgage
Mortgage pre-approval is essential in a competitive housing market because it means you have financing ready to go, therefore sellers are more likely to pick you. Once your mortgage is pre-approved, you’re in a strong position to approach a realtor and start shopping for a home!
Plus, the pre-approval process is a chance to learn key information that can help you on your home buying journey:
- Find out if you can qualify right away for a mortgage or if you need to wait until your finances are in better shape.
- Determine what annual percentage rate (APR) you’re likely to get based on your credit score, debt-to-income (DTI) ratio, and income.
- If needed, you can take steps to improve your credit before you officially apply for your mortgage.
- Find out the home price range you should consider to get an affordable monthly payment.
- Determine what type of mortgage best suits your situation and goals. For example, a fixed-rate vs. adjustable-rate mortgage (ARM) or a jumbo loan.
How to Get Pre-Approved for a Mortgage in Simple Steps
Here’s what to do when you’re ready to seek mortgage pre-approval:
- Find out your credit score and, if needed, take steps to improve it.
- Gather up all your personal and financial documents.
- Choose a lender you trust and can build a relationship with.
- Hit the apply button and wait for a response from a mortgage originator!
- If pre-approved, you can discuss your loan type, amount, term, and likely rate.
Once you find a home and your offer is accepted, you can submit your final mortgage application. Your lender will take some time to check your credentials in the underwriting process. If all goes well, you’ll sign the loan contract and get the funds to buy your home.
FAQs About Mortgage Pre-Approval
You probably still have a few questions about how to get pre-approved for a mortgage, so here are the most common queries we get from people just like you.
How Is Getting Pre-Approved Different From Pre-Qualifying?
Pre-qualifying involves just a soft credit pull to take a quick look at your financial background, and you get ballpark figures only. Pre-approval uses a hard credit pull to assess in greater detail whether you can get a mortgage, the amount, and your likely rate.
Does Getting Pre-Approved for a Mortgage Hurt My Credit?
Your credit will drop a few points when a lender runs a hard credit check. The good news is, If you get pre-approved from multiple lenders within about 45 days, it counts as a single hard credit pull so your credit score will dip only once.
Plus, your credit will recover once you start making timely payments on your home loan.
How Long Does Mortgage Pre-Approval Take?
Depending on your lender, you may get a pre-approval response within one to three business days. Some lenders may take up to 10 days.
Note that pre-approval is different from your final mortgage application, which begins the closing process on your home purchase. The closing process may take 30 to 60 days.
How Far Ahead of House Shopping Should You Get Pre-Approved?
A mortgage pre-approval offer may be good for about 60 to 90 days so you want to aim to find your home within that window. Pre-approval is valid for a limited time because your finances and interest rates may change over a longer period.
If your situation or the markets change, you may qualify for different loan amounts and rates.
What Documents Do You Need for Mortgage Pre-Approval?
Before you apply to get pre-approved, you should spend some time gathering these documents:
- State-issued ID and proof of address
- Bank statements
- Tax returns from the previous two years
- W-2s, 1099s, and other proof of income from the previous two years
- Information about any other assets you have
Should You Shop Around Different Lenders?
Yes, it’s a good idea to shop around different lenders to find the most competitive rates, flexible terms, and friendly local service. Credit unions frequently offer affordable home loans because they are not-for-profit organizations that pass revenue back to members through lower rates.
Next Steps: Choosing the Right Mortgage for Your Needs
Now that you’ve learned how to get pre-approved for a mortgage, you’ll be better equipped when it comes to choosing a home loan. Keep in mind that a 30-year fixed-rate mortgage is the most popular. This is because it offers affordable payments that stay the same every month over a generous term. That said, it’s not the only kind of mortgage.
If you have a higher income and a large down payment, you could choose a shorter term to save on interest. Or if you want an extra-low payment at the start of your loan term, an adjustable-rate mortgage could be right for you. Click below for details!
