You’re ready to start looking for a new home, but how much can you afford to spend? Setting a realistic budget is a key first step in homebuying, which is where the mortgage preapproval process can help.
What Is a Mortgage Preapproval?
During the preapproval process, we review your financial picture, including your income, credit score, assets, and debt. While some institutions use the terms preapproval and prequalification interchangeably, they are not quite the same.
The preapproval process is more in depth and provides you with a more accurate understanding of what you can afford. Prequalification takes less time because it doesn’t verify your income, but it may lead you to believe you can afford more than is realistic, resulting in disappointment down the road when you actually apply for a mortgage.
For mortgage preapproval, we’ll need items like your current:
- Tax returns and/or W2s
- Social security number
- Pay stubs
- Employment history
We’ll do a credit check and review your financial history and debt-to-income (DTI) ratio to determine the amount you are likely to be approved for when you apply for a mortgage.
Once we have all your information, it typically takes about three business days for us to complete prequalification. It’s important to know that the prequalification is only good for a certain amount of time, typically 30 to 90 days, so once you have it, you’ll want to start your home search promptly.
Receiving mortgage preapproval is not a guarantee you’ll get a mortgage in that amount. The preapproval process is the same as the approval process, but when you find a home and apply for a mortgage, there are additional steps required to evaluate the property you’re seeking to purchase—such as an appraisal, title search, and, typically, a home inspection—before you receive final approval.
What Are the Benefits of Mortgage Preapproval?
Completing the mortgage preapproval process before beginning your homebuying journey sets you up for the best possible outcome: finding your dream home at a price you can afford.
For one thing, it lets you focus on homes that are realistic for your budget. If you start home shopping with no sense of your price point, you may fall in love with a home you can’t afford, which can be hard to forget when comparing other homes. Alternatively, you may believe you can’t afford options that are within your reach.
Preapproval also expedites the process because it shows realtors and sellers you are a serious buyer. In fact, many realtors won’t show homes to people who don’t have a preapproval letter. If you decide to make an offer, it also lets them know you are likely to be approved for the mortgage.
Getting the preapproval also puts you ahead of the game when you apply for a mortgage because the bulk of the work is already complete. This means you get to the closing—and into your new home—that much faster.
How We Help
Our mortgage loan officers will work with you every step of the way, from the mortgage preapproval process through choosing the right mortgage option, getting approved, and completing the closing, so you know exactly what is needed and what to expect.
We offer a variety of options to make home ownership a reality for borrowers at all income levels. This includes down payment assistance, closing cost incentives, and 100% financing. Apply for prequalification online today or connect with one of our loan officers. We’re ready to get you on the road to home ownership!
Translate