Buying a home can be a lengthy and confusing process. Spending nights surfing the web, looking for that perfect place to call home can lead to endless searches and even more confusion as to which price point is best for your financial situation.
How do you know what would be considered a reasonable price to look for while searching for your perfect new home? You can try and guess what your mortgage payment will be if you put so much of your savings down and try to approximate your monthly payments using online calculators, but that doesn’t mean a lender will be willing and able to loan you that amount of money.
The best way to know exactly how much money you can safely afford on a home and be able to borrow from a financial institution of your choice is to find a financial institution that can provide you with a free mortgage pre-approval. Once you are pre-approved for a certain amount of money for a home loan, you will know how much money you can spend on a home, which will allow you to narrow your search criteria to a reasonable number of home listings that fit your budget. Having a free mortgage pre-approval also allows you to make a stronger offer once you find that perfect house to call your own.
Now that you know the secret power to homebuying is having that free mortgage pre-approval, you may be wondering how to go about getting pre-approved for your mortgage. The financial experts at Solarity Credit Union have put together a quick guide on how to get your free mortgage pre-approval.
What Is a Mortgage Pre-Approval?
A mortgage pre-approval is a letter provided by the financial institution of your choice stating that the lender is prepared to loan you a certain dollar amount for the purchase of a home. The mortgage pre-approval is subject to the home meeting certain criteria and your financial situation staying relatively the same as during the mortgage pre-approval process. If your financial situation drastically changes, the pre-approval may be null and void.
Having a mortgage pre-approval letter to provide to the sellers of the home you would like to purchase gives your offer some strength, as it confirms your ability to close the home sale with financial backing from your financial lender. If there are multiple bids on a home that you would like to purchase, having that mortgage pre-approval letter can help push your offer to the top of the list over other buyers who may have not gone through the trouble of proving their offer’s creditworthiness.
Before becoming pre-approved for a home loan, consider using an online pre-qualification calculator to get a ballpark of how much of a home loan you may qualify for. Having a pre-qualification does not provide you with the document signed by a financial lender stating someone is willing to give you that much money in a home loan, but it can help you set your expectations before meeting with a mortgage lender.
Select Your Mortgage Lender
Once you have decided that you are ready to meet with a mortgage lender for a pre-approval letter to purchase a home, you now need to do some legwork to select the right mortgage lender for you. Finding a mortgage lender you are comfortable with is an important step in the homebuying process, as opening a mortgage is a lengthy process, and you will be communicating with your financial lender a lot. If you pick a mortgage lender on a whim without researching first, you may end up working closely with a team that isn’t communicative or that you aren’t completely comfortable with.
Also, you want to ensure your mortgage lender is offering reasonable terms for the home loan. Checking the going mortgage percentage rates is often a good idea so that when you research lenders in your area, you are knowledgeable about what mortgage rates are considered reasonable for your area and your current financial status. Mortgage lenders all have their own unique requirements and interest rates, so it’s a good idea to get your free mortgage pre-approval from a few different mortgage lenders so you have some numbers to compare.
Gather All of Your Documents
The mortgage pre-approval process starts with completing an application and typically takes a few days, but it can take longer if you have a past bankruptcy, foreclosure, or property lien or your credit is poor. Lenders look at your financial status, so you need to provide your lender with some documentation to prove your creditworthiness in order to be pre-approved. They confirm there is no identity theft going on. Documents that prove your identity and finances are required prior to pre-approval.
Most lenders ask for financial statements from all of your bank accounts, both checking and savings, including any retirement accounts or any investment income you may have. Be prepared to provide proof of income, such as a W-2, and your employer’s contact information, as some lenders will want to confirm employment status.
If you own property, you need to provide proof of ownership, such as a deed or loan documents. You also need to have records for any debts you currently have, such as your credit card statements.
Agree to a Credit Check
Each lender will run a hard credit check prior to pre-approval. The good news is that you have a two-week window where you can have multiple lenders run credit checks and it only counts as one credit check on your credit report.
Keep this in mind when getting pre-approved so you can get them all done within the 14-day window. This will keep your credit score from plummeting with too many hard credit checks showing up.
Check the Expiration Date on Your Pre-Approval Letter
Once you are pre-approved, check the expiration date on your paperwork. Typically, the pre-approval letter will be good for 30 to 90 days, so make sure you are not getting pre-approved too early in the homebuying process. You want to be ready to shop for homes and put offers in once you have your pre-approval letter.
If you’re ready to start the pre-approval process, reach out to a lender like Solarity Credit Union for your free mortgage pre-approval. It’s as easy as filling out the online application and waiting for the good news.