What is a Mortgage Pre-Approval ?
Talking with a mortgage lender is the first step you should undertake in the home buying process. Most home buyers need a mortgage to finance their home, so make sure you are prepared before you start looking for a home to purchase. Once you are armed with the knowledge of what you can afford, you can focus your search for homes within your price range and it allows you to act more quickly when you do find a home you love.
Lenders will offer a borrower either a pre-qualification letter or a pre-approval letter, but most REALTORS® recommend you get a pre-approval letter before you start home shopping. A pre-qualification letter states the amount a lender thinks you’ll be able to borrow based on your income and credit profile without any actual documentation. Mortgage lending standards have tightened since the housing crisis, and all mortgage loans now require full documentation and verification of income and assets, so most sellers will only accept an offer from a buyer with a full pre-approval letter based on verified information.
Obtaining a pre-approval letter prior to making an offer will benefit you in the following ways:
First, you’ll have completed the credit check and paperwork requirements for a mortgage, so you’ll know your ability to finalize a home purchase. If the lender finds a problem with your credit or an error on your credit report, you’ll have time to fix it before making an offer.
Second, most listing agents will require a pre-approval or pre-qualification letter from a lender to be submitted with any offer, showing the seller that you are a serious and capable buyer.
Third, since your documentation will already be in place, a mortgage pre-approval will likely speed up the process once you make an offer.
Your REALTOR® can help you find a reputable Mortgage Lender or most Financial Institutions and Credit Unions have a Mortgage department than can help you.