Why you need a home loan pre approval?
A mortgage pre approval is given to the borrower from a lender that states you are qualified to borrow up to a certain monetary amount. Included in this pre approval letter will be a specific pre-approved interest rate. These letters are generated through the same factors a traditional loan approval is calculated from. Including your debt-to-income ratio as well as your credit score. The more stable your financial situation is, the more you’ll be approved to borrow, and the sooner you’ll be able to start your real estate journey!
Why you need a home loan pre approval?
The biggest reason a mortgage pre approval is needed is because it lets you know what type of budget you are working with to purchase a home. This single factor allows you to start exploring what you must haves and your deal breakers are, what location fits your budget and the style of home. Whether you want a new build or a preexisting home. It’s really the starting point of any home search.
Taking on a mortgage is a major investment, most borrowers are not going to be able or even want to pay for a home with cash straight up. Finding a lender to give you a mortgage pre approval like Springs home mortgage who takes the time to understand your financial situation can allow you to set a safe boundary for your budget. In order to make a safe investment for yourself and your family.
How pre approvals help buyers
Once you have started the mortgage process, and received your pre approval letter it shows the seller that you are in the market and ready to buy! Some markets are less competitive like a buyer’s market for example, but a seller’s market is quite the opposite. With low inventory and high demand anything you can bring to the table to separate yourself from the competition is vital. While markets do shift between buyers and sellers, a mortgage pre approval will always be needed and should always be your first step towards homeownership.
Pre approvals allow more negotiations
Your home loan pre approval will help you be able to negotiate a deal that falls more into your favor. Sellers will often make adjustments or compromises if they know that a borrower is already approved for the said amount of the house. Often times even the buyer is able to request things such as home repairs, improvements, cover closing cost, or even purchase a home warranty for you. Your mortgage pre approval over all will strengthen your buying position and make it more likely to land on a deal that favors your interest.
You’ll close faster
The real estate process can move as slow or as fast as you allow it to. On average a borrower can expect a real estate transaction to take about 50 days, however depending on many variables you can make this process much quicker. The first and foremost factor to speeding up any real estate process is, is completing the mortgage process.
On average a mortgage preapproval will take the lender 48 hours to process. However, this is very dependent on the lender. Springs Home Mortgage for example can receive and approve a loan in as little as 30 minutes depending if all of the correct material is provided.
How to get a home loan pre approval
Once you have selected your lender that will provide the most optimal lending terms for your situation, the borrower will need to provide important documents in order to receive the approval. Blow is a run through of which documents you need to provide so you can plan accordingly for your mortgage preapproval.
A home loan preapproval starts with your personal information. This includes your social security number, as well as proof of identity. These are crucial to the process as it allows the lender to run a credit check. Credit checks are important because it gives the lender insight to what your income to debt ratio is, including your financial history.
Once your personal info bases are covered, the next step is providing your lender with the proof of your income for the past two years. This will include a 30-day paystub, two years of W-2s and any other alternate tax information, as well as information related to other sources of income that you may generate.
The last step of the mortgage preapproval process, is your asset information. This consist of providing any documents related to assets that are unassociated with your income. This could be any investments or, large monetary gifts received. If you are documenting a gift, it is required that you provide a letter from the individual that gifted it you.
Having this information ahead of time can greatly decrease your processing time, and increase your home hunting time! Once a broker has all the documentation that is needed the approval is sent to an underwriter, They will determine what amount you qualify for with your mortgage preapproval. From here your mortgage process is complete.
A home loan pre approval is valid for 60 to 90 days, giving the borrower enough time to search for a home and make an offer. If you extended pass the 90-day grace period just speak with your lender and find out how to reapply.
Lastly, it’s very important to remember that even if you are preapproved for a certain amount that does not always mean you SHOULD borrow that amount. Work closely with your broker and realtor to set a budget that is sustainable, you can even get an idea of this by using our mortgage affordability calculator here
For any other mortgage preapproval questions please call us today or submit a contact form here!
– or –