If you are considering buying a home, you may be unsure of where to start. Do you start by finding the home of your dreams first? Or do you figure out the finances first?
Regardless of whether you have actually started looking for your dream home, one of the first steps you should take is to get pre-approved for a mortgage.
What does it mean to get pre-approved?
A mortgage pre-approval is the result of a process where a lender will look at your financial situation to figure out if you are a good candidate for a mortgage. The pre-approval process is a more intensive financial review than the pre-qualification process, which mainly helps determine how much house you can afford without verification of the information provided.
In the pre-approval process, your mortgage lender will review your credit, income, assets, and debt to determine whether you are financially ready for a mortgage.
Receiving a pre-approval typically implies that your mortgage lender is willing to lend you the money for your mortgage. It also shows sellers that you are financially serious about buying a home.
So, how do you get pre-approved?
Let us take a look at the steps you must take in order to start the process:
- First, contact your chosen mortgage company and speak with a seasoned Loan Officer who is licensed in your state. You can also start this process online with many lenders.
- If you call, a Loan Officer will provide information over the phone and send you a pre-approval application to fill out. The application can be sent via text, email or U.S. mail.
- From there, you fill out the application and submit it to the lender.
- Then, your credit will be reviewed, along with your income, assets, and any debts you are carrying.
- Next, your information will be submitted to an Underwriter who will double check your application and make sure it meets loan program guidelines.
- If you meet loan program guidelines, you’re pre-approved!
- Lastly, you will be issued a pre-approval letter, so you can start shopping for a home with confidence!
What is included in the pre-approval letter?
New American Funding’s pre-approval letter will include the following information:
- Purchase price
- Loan-to-value ratio
- Loan type/Term
Why is it important to get pre-approved?
Getting pre-approved will help you determine how much home you can afford, and you should start before you even find your dream home. The last thing you want to do is find your ideal house only to be told that you cannot afford it.
You should contact your mortgage lender first and complete an application and provide any necessary documents related to your financial history. Once the application has been completed, your lender will then determine how much money they can lend you, which will allow you to look for homes within that price range.
Why else is it important to get pre-approved?
When you are ready to make an offer on the home you are interested in purchasing, both the Real Estate Agent and home seller will likely want to see a pre-approval letter. This document will confirm that you are able to afford to make the purchase and can be taken seriously. Homeowners are more likely to accept an offer from a borrower who is pre-approved than from a borrower who isn’t. That’s because sellers don’t want a deal falling apart because the buyer’s finances aren’t what they seem.
One note: A pre-approval on a mortgage is typically good for 30-90 days, but this may vary across lenders.
The best way to start the pre-approval process is to contact a New American Funding Loan Officer. Our experienced mortgage professionals will help give you an idea of how much home you can afford.