What is a Mortgage Pre-approval? Step 1 of the Mortgage Process
Imagine that you are energetically scanning Zillow, or another website, looking for your dream home and boom! There it is, just like you’ve always envisioned it. After a quick call, you jump in the car and find yourself in front of the home, standing on the luscious green grass as the sun sets. Walking down the halls you feel right at home. Then the realtor pops the question, you are pre-approved right? Talk about shattering your dream.
Unfortunately many consumers think that the mortgage process starts with hunting for the perfect home. While house hunting is fun, it can lead to heart ache when you are told that you can’t afford the home you just fell in love with. Getting pre-approved is the key to avoiding these situations and that’s why it is the first step in the mortgage process.
What is a pre-approval? A mortgage pre-approval answers the question, how much mortgage can I afford? It is a letter that states the maximum amount of money you qualify to borrow for a mortgage, given your financial situation. Your pre-approval helps you avoid looking at homes you can’t afford and becomes extremely useful when you decided to submit an offer on a house.
How do you get pre-approved? In order to determine the amount that you qualify to borrow, a loan officer has to look into your financial history. This is typically done by meeting with your loan officer and reviewing income documentation, your work history, and your credit history.
Are there other benefits from getting pre-approved? There are. Meeting with a loan officer is a great time to ask questions. The mortgage process can be complicated; why not get answers from a professional up front? Discuss items like the different loan programs that could fit your needs or what to expect throughout the loan process. Beyond answering questions your loan officer can also help you find an experienced realtor who will fight for you.
What’s next? By the end of the pre-approval process you’ll have a written letter stating how much you can afford, knowledge of the different loan programs available to you, and the help of a trusted realtor. It’s time to find the dream home that’s within your budget!
