I wish that homebuyers understood the importance of getting pre-approved for a mortgage. Too many times, they start looking at homes online, touring open houses and even talking to a real estate agent well in advance of actually getting that pre-approval letter. Look, I get it, digging into your financial situation isn’t the fun part. Looking at houses is the fun part, but unless you’re going to pay cash for the home, getting pre-approved for a mortgage is really the critical first step because it’s important to know how much home you can afford, what your downpayment amount should be, and whether there are going to be any problems that might prevent you from getting a loan in the first place.
Getting pre-approved for a mortgage is actually straightforward and simple. Typically it’s as easy as filling out some financial information on the lender’s secure online application which can typically be found on their website. Assuming you already have all your information handy, it will take more than 20 minutes.
Mortgage pre-approvals are documents that verify whether you can get approved for a mortgage loan and for how much. Pre-approvals don’t mean you have a final approval – only the green light to shop around and find the perfect home. With your mortgage pre-approval completed, you can shop confidently, knowing that your offer to purchase a home will get approved. Without a pre-approval being submitted with your purchase offer, the sellers won’t even consider your offer.
Pre-approvals perform a different function for mortgage lenders. Your pre-approval is a dress rehearsal for your actual mortgage approval with a lender. A pre-approval uses your job, your credit, and a fictional home to find:
- Your maximum allowable purchase price
- Your anticipated mortgage interest rate
- Your probable monthly housing payment
It can also use your pre-approval to estimate mortgage closing costs and make your final approval happen faster. Freddie Mac suggests that getting pre-approved saves you money.
How to Get Pre-Approved?
There is a formula for getting a mortgage pre-approval. No matter your lender, plan to follow these basic steps.
1. Determine Your Monthly Payment
The most crucial part of buying a home is being sure you can afford its payment. So, before you get pre-approved, decide how much you feel comfortable spending each month and write that number down. A mortgage lender may pre-approve you for a larger monthly payment. Stay within your budget.
2. Find a Mortgage Company To Pre-Approve You
Mortgage pre-approvals are available for free through most mortgage websites with no obligation to proceed. So, don’t overthink this step. Just ask your Realtor® for a good recommendation as they know several experienced lenders that will treat your right. The critical part of getting your pre-approval is that you get it. Without a pre-approval, you cannot buy a home.
3. Locate Financial Documentation
As part of your pre-approval, the lender may ask for supporting paperwork, including:
- Bank statements
- W-2 statements
- Pay stubs and proof of deposits
- Federal tax returns
- Student loan statements
I always suggest having them downloaded or on your hard drive in advance. This makes it faster and easier when you are filling out the online application and it asks you to upload these documents.
4. Get Pre-Approved
Mortgage pre-approvals get processed online or in person and typically only take a couple of days at most to hear back from the lender. Once you have the pre-approval, you can then begin looking at homes and get serious about making an offer with your Realtor®. Feel free to reach out to Ron Henderson 816-651-9001 with any additional questions.