Preapproval is a step that allows you to secure mortgage financing from a lender before making an offer on a home. It helps expedite the home-buying process and can make you stand out from other potential buyers.
A mortgage preapproval letter is a written confirmation that a lender has verified your income, credit history and debt-to-income ratio in order to determine the maximum amount they will loan you for home purchase. They also detail the loan program and interest rate you can expect, with possibly an expiration date included.
Preapproval is essential as it conveys your interest in purchasing a home. Additionally, it sends a strong signal to sellers that you are serious about buying their property and they may be more willing to negotiate with you.
Before you begin searching for a home, it is wise to get preapproved at least six months to one year prior. Furthermore, shop around several lenders to compare interest rates and fees. Furthermore, get preapproved within 45 days of applying so that all credit checks count as one hard inquiry and have minimal impact on your credit score.
How to Acquire Mortgage Lender Pre Approval
In order to receive mortgage lender pre approval, you’ll need to fill out either an online loan application or visit a bank in person. This step is critical as it allows you to determine how much you can afford and save for down payment expenses. It also helps set a budget so that you don’t overspend when purchasing a home.
The application process is usually swift and effortless, with most lenders verifying your information within one business day. Some even use a web-based preapproval process that automatically pulls and verifies financial documents like pay stubs and tax returns for you.
If you opt for a self-service preapproval, you’ll receive an instant response within three minutes. However, it is wise to speak with your real estate agent or lender regarding the preapproval so they can confirm that you remain within budget and don’t need to adjust your home-buying plan.
Once approved, a lender will issue you with a mortgage preapproval letter on company letterhead. This document serves to demonstrate to potential sellers that you are serious about purchasing the home and have the financial means to do so. It also informs them of your commitment to using particular lender and that financing can be secured for the property – information which may prove advantageous when negotiating with sellers.
Your mortgage preapproval letter is valid for 60 to 90 days and may have an expiration date. In order to reapply with updated paperwork and request a new preapproval letter, you will need to re-submit your application.