How to get preapproved for a home loan? Step-by-step Process
This article is a complete step-by-step guide on how to get preapproved for a home loan. The stage between the initial prequalification and the mortgage application is considered as Mortgage preapproval. It basically shows how much money the lender is ready to lend to you. Also, it tells for which type of loans you can qualify. Hard credit check is required to get preapproved for a loan that impacts your credit score, while on the other hand, prequalification does not require any type of credit check.
Preapproval being an essential step for the people who are willing to buy homes, it makes the purchase offer more competitive. Sellers usually prefer selling the home to someone who has already preapproverd for the loan as compared the one who hasn’t.
If you have preapproval of a loan, it’s not necessary that you are qualified for a loan. Yet, when you are going to buy a home, you will have to get approved for the mortgage.
Steps to Get Preapproved for a home loan
The following three steps will help you get preapproved for a mortgage.
Step 1: Obtain an approval letter for a mortgage.
Obtaining a mortgage preapproval letter from a lender should be your top priority when it comes time to start looking for a place to call home. The preapproval letter demonstrates to the seller—as well as the real estate agent assisting them—that you are a serious buyer and that you are aware of your financial situation.
Preapproval times range from one hour to ten business days, depending on the volume of documents your lender demands and the pace at which it processes applications at the time. You can show home sellers that you’re a serious buyer by including your preapproval letter in your offers after you receive it.
Step 2: Examine your credit report.
Before speaking with a lender, go to AnnualCreditReport.com as early as one year in advance to obtain a complimentary copy of your credit reports from Equifax, Experian, and TransUnion, the three major credit bureaus.
If you can locate any mistakes or significant inadequacies in your credit history and make an effort to fix them, you’ll be able to save time for both the lender and yourself.
Step 3: Speak with Several Lenders
You can locate the most affordable rates and costs by comparing many mortgage companies. If possible, try to get preapproval from several lenders within 45 days to lessen the effect on your credit score. During this 45-day period, the credit bureaus handle several queries as a single query.
Additionally, to make sure you have everything in order, you might wish to get in touch six to twelve months in advance of applying for a mortgage or preapproval. According to Christopher Jordan, branch manager of Main Street Home Loans in Silver Spring, Maryland, contacting a lender 12 months ahead of time “may seem too early.” However, it gives us time to get ready if there’s anything you need to work on. It could take four to six months to resolve a credit issue, so we want to make sure we provide adequate time for it [during the buying process].
When to Receive Preapproval for a Mortgage?
When you’re ready to start looking for a home, you should think about applying for preapproval. Possessing a valid preapproval letter can greatly improve your chances of getting your purchase offer approved.
How to Apply Online for a Mortgage Preapproval?
These days, a lot of lenders let you apply online to get preapproved for a home loan. The primary advantage of this is speed. Some online lenders provide a preapproval letter as soon as you submit the application, while many lenders need one to three business days to process your application and send you a letter.
Find a trustworthy online mortgage lender first, then make sure you have the necessary paperwork in order to receive a mortgage preapproval:
- a duplicate of your Social Security card
- W-2 employment forms spanning several years
- Pay stubs
- most recent bank and investment account statements
- tax returns from the previous two years minimum
If nothing else, buyers frequently put off doing this work until later since they are unsure of where to begin when choosing a lender. They might also be hesitant to choose the “wrong” lender, particularly if they think it would be a waste of time or cause their schedule for buying a property to slip.
How long does it take to receive a preapproval for a mortgage?
A lender’s preapproval of a potential borrower can happen quickly or slowly. It largely relies on how soon you collect and send in the required papers as well as how long it takes them to go over your financial records.
After the lender receives all of your data, you should have a loan estimate in three business days, or even less if you utilize an online mortgage lender. This estimate will indicate whether or not you are preapproved for a mortgage and how big of an amount.
How much timeit takes to get a mortgage preapproval?
The preapproval period for a mortgage is not endless; the exact duration varies according on the lender. Preapprovals for mortgages often have a 30-to 90-day expiration date.
