Getting pre-approved for a mortgage can help you buy your dream home faster. Here’s how it works, who should get one, and the best place to find lenders in the U.S.
What is Mortgage Pre-Approval?
Mortgage pre-approval is when your loan officer verifies that you meet the basic requirements to receive a mortgage before you start house hunting. If this is done first, you’ll be able to see what type of house you can actually afford and quickly find homes within your budget rather than wasting time looking at properties over your head.
Then once you’ve found the home of your dreams, all you should need to do is submit an application for pre-approval with the bank or other lender who will be issuing your loan. This saves precious time by ensuring that there are no delays during underwriting because it has already been given the “thumbs up” beforehand — saving weeks if not months in some cases.
Who Should Get Pre-Approved?
Based on today’s ultra-low mortgage rates, it makes sense for anyone buying a home to obtain pre-approval first. This way you won’t be under pressure to buy something that is out of your budget. With this strategy, you’re less likely to make an offer on the first house you see because it’s within your range rather than thinking “it’s now or never”.
So who should get pre-approved? Anyone with steady employment, good credit, and income. This includes both married couples and single people living alone. It doesn’t matter whether their combined household income is twice the minimum wage or $200K per year.
The Best Place to Get Pre-Approved for a Mortgage
We recommend getting pre-approved at one of the major banks. Not only do they offer competitive interest rates, but this is where most people get their home loans anyway.
And while you’re at it, see if you can also get an unsecured personal loan since lenders generally give better deals on bundled packages than just about anywhere else. Whether you want to consolidate your credit cards or write that special someone a romantic surprise, there are savings to be had by simply walking into your bank and asking about it!
If applying online for a mortgage is something that scares you then don’t worry because pre-approval from a local branch works exactly the same online.
Your loan officer will start by asking you to provide some basic information such as:
· Your full name and that of your spouse if applicable
· Physical address where you intend the mortgage to be registered
· Date of birth if self-employed or one’s the tax ID number for business owners who are not filing personal income tax returns.
If applying for a home loan, they’ll also ask about your current employment status. And after figuring out how much money you earn each month, they’ll do the math to see how much house you can afford based on your outstanding debts. Since this is meant only as a guideline, it’s always good practice to make sure everything checks out before signing any forms.
This is where it’s important to not only compare the interest rates on your home loan but also check out what kind of terms are imposed by each lender. Many banks will charge more if you make a late payment or miss an installment.
Another reason to consider getting pre-approved at a bank is that not all mortgages are created equal. Some offers may come with stricter qualification criteria than others making it harder for some people to qualify depending on their credit score and income level.
The decision to get pre-approved is up to you. Just keep in mind that this will save you both time and money when looking for a new home. And once it’s done, all your agent needs to do is submit the proof of pre-approval which is usually valid for one year.
If you’re planning to buy a house and use it as an investment, learn about using hard money loans as an option to finance it. A hard money loan is a type of property financing that helps investors buy off-market properties without having to deal with slow lenders and agents who are not familiar with wholesale deals. A hard money loan is much like a traditional mortgage. Unlike a traditional mortgage, however, you can get approved for a hard money loan in as little as 24 hours.
But while these types of loans can be great at getting people into houses when other options are limited, they don’t come cheap because they’re considered high-risk investments. Of course, this isn’t much consolation if you’re stuck living in an apartment when there’s a house out there that you’d love to call your own!
So summing up, there are several advantages of obtaining pre-approval for a mortgage before you start looking at homes.
You’ll have a better idea of what you can afford and know exactly how much to budget for when searching for your dream home. This saves time because instead of wasting hours seeing houses over your budget, you can quickly cut them out of your list or make an offer right away if the price is right.
And finally, this eliminates any last-minute surprises that could delay underwriting like having to wait weeks (if not months) to find out if you’re even approved after submitting an application with the bank — simply because they already checked in advance that you meet all the requirements.