Buying a house is an exciting prospect, but it also involves a lot of paperwork and financial preparation. One of the most important steps you can take when looking at homes is to get pre-approved for a mortgage. This not only saves you time when you find a house you like, but also lets you know how much mortgage money your bank is willing to lend you.
How to Get Pre-Approved for a Mortgage
Getting pre-approved is a pretty simple process once you’ve gathered your information and decided what type of mortgage you want. You should speak to banks or financial lenders to discuss the different mortgages available and to get an idea of how much you can expect to pay each month based on the amount of the mortgage and interest rate.
The lender needs certain information from you for the pre-approval process. Typically, you must collect and present:
- Your Social Security number
- Recent bank statements that show how much you have in your accounts
- Payroll stubs from the last few weeks of employment
- Information concerning any other loans or large debts you have
The bank might also ask for a recent tax return statement and will run a credit check. It’s not impossible to get a mortgage if your credit isn’t outstanding, but good credit helps you secure a larger mortgage at a lower interest rate.
Once you present the bank with all the information, and they review it and run a credit check, they can pre-approve you for a mortgage of a specific amount. You will be notified by a pre-approval letter, and the process can take anywhere from an hour to a week to complete.
Why It Matters
When you meet with real estate agents, and they show you a house you like, your pre-approval letter is proof that you can afford it. It also lets the real estate agent know what your price range is so you don’t waste time looking at houses you can’t afford. Also, most sellers won’t accept an offer without a pre-approval letter.
The mortgage pre-approval letter guarantees you a mortgage at a specific rate for 90 days, so even if interest rates go up within that time, you are secure with the lower rate. Once pre-approved, shop around for multiple offers from websites like LendingTree.com.
To learn more about the advantages of mortgage pre-approval, speak with your bank’s mortgage representative. Once you get pre-approved, make sure you make an educated decision before purchasing your home.