How to Get Preapproved for a Mortgage
Searching for your family’s dream home with a partner is one of the most exciting experiences in life. You’re looking for the perfect two-story house with a game room, open floor-plan, walk-in closets, and a large backyard for a trampoline and a dog. That is indeed a dream and an adventure.
However, there is a paperwork process you all need to run through with a personalized lender before you get started. It is securing a preapproval letter, which is a practical step that opens up your home shopping experience. Most homeowners won’t let you put down an offer without this necessary documentation.
The financial paperwork side of buying a home may not be the most exciting, but it is vital. Following the proper steps ensures that you have the least amount of roadblocks when you do put an offer in on your perfect family home.
If you have never heard that you need a preapproval letter when seeking a mortgage loan or have no idea what the preapproval process entails, you are in the right place.
What is Preapproval?
A preapproval letter is a statement from a mortgage lender that says they qualify you with a certain loan amount to purchase a home. This letter proves to the home seller that you have the funds and the ability to buy their house.
Most homeowners require you to accompany a home offer with preapproval before they ever begin negotiation. It saves them and you wasted time when you already have the letter in hand before house shopping. All parties understand you and your partner have what it takes financially to buy a home and proceed with the deal.
A preapproval letter lends validity to the seriousness of your search and offer.
Preapproval vs. Prequalification
You may have heard real estate agents use “preapproval and prequalification” interchangeably, but they mean quite different things.
Preapproval means that a lender has assessed your finances and concluded that you can purchase a home under their conditions. Prequalification, though, only proves that you intend to buy a house. It gives you as the buyer a good idea of what loan amount you qualify for.
Securing prequalification is the first step when deciding you are ready to begin the homebuying process. You and your partner will submit financial information to a private bank or lender, and they’ll give you a loan estimate you qualify for.
This is a great idea when starting homeownership conversations to understand if you have enough to purchase your dream home. Experienced home lenders will also walk you through how to improve your finances now so you can get a higher prequalification later.
And that will eventually turn into a guarantee through a preapproval letter.
The more binding and involved home loan process is obtaining a preapproval letter. To begin, you must submit an official mortgage application to your home lender. We recommend applying with multiple lenders to secure a better rate. Or working with an experienced lender who’s dedicated to giving you a personalized home loan.
The lender will assess your finances by reviewing your credit score, bank accounts, credit cards, bank statements, and debt-to-income ratio (DTI). All of this will give them a picture of the home loan you qualify for and what rate they can give. Their job is to ensure you are a trustworthy couple to lend money to.
A preapproval letter is more of a sure thing because your homeownership confidence comes from a lender that’s on your side. They guarantee your home loan and help your family begin your residential dream.
How Long Does the Preapproval Process Last?
Once you have applied for preapproval, you should receive the letter within the next week. It could take more time if there are complications or special conditions. But most borrowers get approved within seven business days.
Your preapproval letter lasts between 60-90 days and you’ll need to reapply if you don’t come under contract in this window. The reason that preapproval letters expire is that your financial situation could change drastically within that time frame.
Having to reapply for preapproval if you have not yet found a home is not always a bad thing. Sure, your credit score may fall if you make a significant purchase or default on a payment, but your score could also improve. That will increase your chases of receiving a better mortgage rate.
It is important to note that applying for preapproval requires a hard credit check that will affect your score. You do not want to have too many of those on your credit in a short period because it will lower your score.
But, if you wish to secure preapproval from multiple lenders, a hard pull of your credit within days of each other for the same purpose will only affect your credit as one hard check. So credit agencies won’t penalize you for house hunting and shopping around.
How Do I Start the Preapproval Process?
We recommend waiting to apply for preapproval until you are serious about purchasing a home. Prequalification is a better idea for you to give you a good understanding of what you qualify for. And you can combine this with an amortization calculator to lay out what your future payments could become.
But when you are ready to buy a home, or if you’ve already found it and are ready to put down an offer, you should pursue preapproval.
You and your partner can begin the exciting home buying journey with us today by filling out our mortgage application. We will ask for detailed financial information to speed up the process and get your preapproval as soon as possible.
Our team is more than happy to answer your questions if you’re not ready to apply but want to learn more. We’re dedicated to personalized service and want to hear your story so we can get you and your kids in the house you’ve always wanted.
Give our Highly Motivated Vercellino Team a call today at (480).800.8387.