Many individuals planning to buy a house scratch their heads when they hear this. ‘What is a pre-approval? And, why do I need to get one?
A mortgage loan pre-approval is a very useful way to know how much money can be borrowed to finance your home purchase.
A nonprime loan pre-approval is important. Through it, a lender can take an in-depth look at your documents and credit information. With this data, the lender can determine if you are qualified for a mortgage loan and how much money will you be getting.
A pre-approval details the maximum loanable amount and the interest rate that will apply to your loan should you proceed to the underwriting.
Make Things Easier, Get a Pre-approval
When purchasing a property, it is wise to always start by obtaining a pre-approval. Before you even reach the underwriting process, the lender has already examined your documents. They have already evaluated your credit standing. The estimate you get from a pre-approval is more likely the amount you will be approved for when getting a loan.
Choosing to undergo
pre-approval will help you establish your footing before looking for a property.
From this estimate, you can now set a more realistic budget and start looking for a home. This easily eliminates those properties which are far more expensive than the budget you set.
Examining a house, visiting it and checking it out, will entail some money. So much more when you carry on with the home inspection. It won’t be practical to have each and every house you have been offered with inspected. It will cost you thousands of dollars doing so.
You can shortlist the properties according to your budget. You can then examine more thoroughly the houses which appeal to you most.
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It Alerts You for Possible Problems Along the Way
Another beneficial thing about getting pre-approved is that a lender can give you a heads up if they see any problem before proceeding to the next steps of the application process.
This buys you some time to work on these imminent problems. If you do the fixing on time, it can help you get a better loan offer. If this happens to you, don’t waste your time and start necessary improvements.
Getting a Pre-approval DOES NOT Tie You Down to a Lender
A common misconception about a
mortgage loan pre-approval is that getting one will lock you with one specific lender. This is NOT TRUE. This is usually the reason others do not and will not get a pre-approval from some another lender.
The truth is you can even have one lender pre-approve a loan and present it to another lender to get the financing.
It is important to shop for lenders. Getting loan offers from at least three various lenders will ensure you are getting the best mortgage loan deal. This enables you to compare the maximum amount you can borrow, the interest and other terms.
The pre-approval is also not a promise to lend you money. It simply says if you are eligible for a loan or not, and how much money they are willing to fork over.
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What Documents Should You Prepare?
To get the pre-approval process going, here are the different information needed. These include, but are not limited, to:
- Documents that show your recurring expenses in last two months. Examples of such are rental and mortgage payments, credit card statements and utility bills among others.
- If you have a job, you will need to provide copies of your
W-2 forms and tax returns.You must submit the most-recent two years of these documents. For the self-employed, your tax return may apply in your case.
- Your recent bank account statements. This will serve as proof that you have enough money in your reserves to pay for the down payment and upfront costs. This can be statements of your savings or checking accounts. If you are retired, your retirement account statements will serve the same purpose.
- Include your social security number, residence address, and credit information. These personal details are equally important in determining the amount of money you can borrow.
If you want an easier and faster way to get a good mortgage loan, do not hesitate to get a loan pre-approval. Speak with different
non-prime lenders to have wider and better options.
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