Mortgage Pre-Approval

A mortgage pre-approval is given when a loan officer has looked in depth into your finances and has calculated the amount that you are likely approved to borrow to buy a home.

They will base your pre-approval on estimated monthly payments, loan amount and mortgage rate. Homebuyers may need a mortgage pre-approval before they are able to make an offer to buy a home.

Is a Pre-Approval a Guarantee for a Mortgage?

A mortgage pre-approval is not a guaranteed for a mortgage. A borrower must still undergo the underwriting process to be fully approved for a home loan. Once a property is determined, an underwriting will review credit, income, assets and the property to confirm eligibility.

Importance of a Pre-Approval

Important information about getting Pre-Approved for a Mortgage.

In today’s market, it is hard to stand out from other buyers especially when you have found your dream home for sale. It is very important to stand out and gain a competitive advantage.

A pre-approval gives three main advantages to buyers:

  1. Confidence on what homes you can afford. This allows you to narrow your house search and find that dream home quicker!
  2. A mortgage pre-approval gives you credibility to the seller. The seller knows that you are serious about purchasing their house, that you can financially afford the house, and a denial of a mortgage is unlikely if they decide to sell the house to you.
  3. Closing on the mortgage will be faster because the lender who provided you the pre-approval already has all your financial information in their system.

Pre-Approval vs. Pre-Qualified

The difference between a pre-approval and being pre-qualified is proof of your finances. A pre-approval involves a buyer to prove his income, debt, credit, and assets by sending official documentation in.

With a pre-qualification a buyer just tells the lender these details without providing proof. This is because a pre-qualification is just a rough estimate based on the numbers given without proof.

How to get Pre-Approval for a Mortgage

After you have spoken to a Riverbank Finance Employee or another lender and explained your objectives, they will need a list of important documents. These documents include:

  1. Driver’s license or U.S. passport.
  2. Citizenship Documentation / Green Card (If applicable to your situation).
  3. Social Security Card.
  4. Credit Authorization. The lender will need your permission to check your credit.
  5. Verification of Employment. The lender will need to know if you have a stable employment.
  6. Pay Stubs for the last 30 days.
  7. W-2s covering the last 2 years.
  8. Proof of additional income.
  9. Personal federal income tax returns for the last 2 years (Needed if Self Employed or Commission).
  10. Business federal income tax returns for the last 2 years (only if you are self-employed or if you own 25% or greater of the company you work at).
  11. Bank statements which prove you have the funds for a down payment and closing costs.
  12. Gift Letter if you are being gifted the down payment.
  13. IRA, 401(k), mutual funds, and stocks accounts from the last quarter.

When is the right time to get Pre-Approved?

One of the first steps when looking for a new house is getting a mortgage pre-approval. Before you start looking for a new house, have the following completed first:

  1. Being debt free from car loans and student’s loans is very important before taking on a mortgage.
  2. Having a savings fund that contains 3 – 6 months of expenses. Anything can happen so it is very wise to plan for the worse. Imagine losing your main source of income after attaining a new mortgage with no savings!
  3. Have at least a 10% down payment. If you do not have 10% in the bank right now, you should not buy house. The main goal is to get 20% so there is no private mortgage insurance tacked on to your bill monthly!
  4. Spend within your means. Your mortgage payments should not exceed more than 25% of your income after taxes. If you do go over 25% you will put a significant strain on your financials, your retirement, and most importantly–your family.

Is there a Pre-Approval Expiration?

Mortgage pre-approval letters have an expiration that last about 45-90 days. This is because much can change financially for a buyer in that time. For example, a buyer could attain more debt from a new car loan.

This means the lender will need updated documentation so they can recalculate how much house you can afford, your new monthly payment, and your new interest rate.

Do I have to go with the Lender I was Pre-Approved at?

You are not obligated to continue working with a lender after receiving a pre-approval letter from them; however, the closing process would be quicker because they already have all your information and documentation in their system.

If you chose a different lender to go with, that is completely fine! You just need to resend all the necessary documentation again to the new lender.

Apply Now for a Home Loan Pre-Approval!

Are you ready to get a competitive advantage as a buyer in this market? Apply now below, to receive your pre-approval or give us a call at (800) 555-2098.

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