Perhaps the most important thing a homebuyer can do to stand out of the crowd is to become pre-approved for a mortgage. This tells the seller that not only are you serious about purchasing the property, but your funds are readily available to do so. This can certainly build confidence in the seller that will quickly help you find yourself within your dream home. However, a common mistake made by buyers, especially new buyers, is that they are not often too familiar with the process of being pre-approved or what pre-approved really means. Therefore the following includes important information regarding this topic and one that must be understood before starting the home buying process.
Mortgage Prequalification
The very first step and one that is often confused for approval is the prequalification part of a mortgage loan. This is where you speak to a lender at your local bank and provide them with some simple information. Assets and yearly income, along with your name, are all they need to provide you with a quick estimate of how much you are probably going to afford with your current standings. Note that this is not what you are going to pay per month on your mortgage, simply an estimate.
Becoming Pre-Approved for a Mortgage
Once you’ve taken the time to go over the numbers and truly want to purchase a home, then it is time to speak with a lender once again. This time, you are going to be aiming for a pre-approved mortgage. The lender will then dive deeper than what you told them regarding your income and assets. They will investigate to see you actually are telling the truth. Then they will compare your income to debt ratio to see how credible you are in paying back your loans. All this will provide you with a favorable or unfavorable answer.
Approval Duration
One of the most common questions buyers ask is how long the process is going to take. The good news is that you can help speed up the process by making your documents freely available to your lender. These should include proof of asset ownership, W2’s, and any debts you have pending. If you have a lot of debt or don’t really have the best of credit scores, the process can take a little longer as certain restrictions will be placed on your loan.