How to Get Pre-Approved for a Mortgage

Many people mistake the pre-approval process with the pre-qualification process. Yet, they are different for many reasons.

The pre-qualification process is when you have the ideas of your ideal house price ranges. Meanwhile, the pre-approval process in this article means a loan-approving process by an underwriter under some specific conditions.

There are chances you will not get the pre-approval. By reading this article, you will have easier times obtaining your pre-approval. You will also know when you can start trying.

Why does pre-approval become such a crucial process?

Pre-approval is unlike pre-qualification processes that give you instant results on the possible house choices based on your credit scores. It becomes a crucial process due to the following reasons:

● While it’s true that both of the pre-qualification and pre-approval processes require your credit reports, it is the pre-approval process that determines your final scores. After all, the lender will verify the information and house loan requests more thoroughly than in the pre-qualification process.

● Getting a pre-approval means you are settling your choices for one (or more) property (or properties). Hence, it becomes a mandatory process to show sellers you are serious about buying the house.

● The pre-approval can reduce timelines to secure the properties faster than when you only rely on the pre-qualification processes.

This data chart pictures the urgency of getting a pre-approval:

(Source: https://www.prioritymortgage.com/2017/03/30/why-should-i-get-pre-approved/)

Who does the pre-approval process (and how do they do it)?

The pre-approval processes are similar to the pre-qualification processes in that both of them are in the house-buying scope. So, any real estate professionals can contribute to the pre-approval process.

Yet, real estate agents and mortgage brokers do not play as significant parts as they used to be in the pre-qualification processes. After all, these two parties’ primary roles only lie in providing possible house choices and listing the prices and requirements.

Instead, the underwriters and the lenders are the parties that play more significant parts in the pre-approval processes. These ways are the ways each of them plays their roles:

● The underwriters generally review the documents you supply during the pre-approval process. They do not only check your credit scores and tax returns. Instead, they also verify the assets that you reported before you apply for the pre-approval. Typically, such underwriting processes will take 2-3 business days to complete.

● The lenders play their parts after you complete the underwriting processes. These people are the professionals who will let you know how much you can lend and whether your proposed amounts are acceptable or not .

Financial consultants like Lionhood Financial can also educate you all about the financial aspects of the pre-approval process . That way, you can have a more convenient time doing the step-by-step.

How do I obtain my pre-approval?

In total, you would need to wait for around ten business days to obtain your pre-approval. You may want to discuss your needs with financial consultants like Lionhood Financial to prepare yourself.

So, there are step-by-step instructions to execute. More precisely, these steps are the actionable ways for you to get your pre-approval:

1. Unlike pre-qualification that lets you browse different house selections, the pre-approval process involves the diverse types of mortgage and loan terms. Amortization is one of the elements you will find in this first step.

2. You will also obtain some informational pieces on your properties. More specifically, you will know the address, year built, loan characteristics, type of residency, and more.

3. After supplying the necessary documents, the lenders will provide you with a three-page loan estimate document. It specifies the maximum loan amount based on your financial capabilities.

4. The underwriters will review the document from the lenders and your supplementary documents to ensure you meet the guidelines. Even though it usually requires around 2-3 business days for this process, some people need around a week to pass through this step for many reasons.

5. Finally, the lenders will give the pre-approval after you have passed the review sections from both the borrowers and the underwriters.

When can I start trying to get the pre-approval?

In general, the pre-approval process is the step that ensures your confidence in settling for one (or two) of your desired places to live. So, refraining from getting the pre-approval if you are still feeling unsure should make sense.

However, such cases are not always for everyone. Some people have planned to obtain their pre-approval before and during the exploration times in pre-qualification processes. They believe the sooner they start the pre-approval processes, the more likely they can secure the price ranges.

For instance, the closing prices and other cost elements of the house tend not to change before three months. People who have planned their pre-approvals with their financial consultant (Lionhood Financial, for example) can extend the duration up to four months.

Most people only get their pre-approval once. The reason does not only lie in how expensive most properties are. Instead, there are also ever-changing things that need re-assessments. Consequently, some people may have to retake the pre-approval twice (or more).

What are the typical constraints for me to get a pre-approval?

A pre-approval process is like any other process in buying properties. It requires you to drain some of your savings. Hence, we can say budget should be the typical constraint in getting a pre-approval.

Nevertheless, there is another underlying thing that concerns our budget. That thing is all about our credits. Yet, there are times when the constraints do not only involve the credit scores. Here are the explanations:

● The most obvious thing is, lower credit scores can pose more challenges for you to obtain your pre-approval. So, that’s why bank applications are always lengthy.

● In some cases, you may experience specific circumstances like bankruptcy. This situation is always unacceptable for getting a pre-approval.

● Mistaking pre-approval for pre-qualifications can lead to delays and miscommunications in processing the documents. For instance, failing to provide the W-2 statement and copies of pay stubs can delay the document-processing step.

● Other common mistakes like not meeting the age requirements and not having steady employment histories can also apply. In particular, first-time buyers are the people who tend to experience such things.

References:

1. https://www.bankofamerica.com/mortgage/learn/mortgage-prequalification/

2. https://www.moving.com/tips/4-reasons-to-get-a-mortgage-pre-approval/

3. https://www.bankrate.com/mortgages/pros-and-cons-of-prequalification/