Demystifying the Mortgage Pre-Approval ProcessDecember 3, 2012
Many questions arise when considering your first home purchase and mortgage. Should you get pre-approved? Why is pre-approval important? When should I apply for a mortgage – before I look for a home, or after I find one I would like to buy? By dealing with these questions now, you’ll be much more prepared for the mortgage approval process and all that comes along with it.
Is Pre-Approval Required?
In a word, no. You can always apply for a mortgage once you’ve placed and had an offer accepted on a home. However, pre-approval gives you a really good idea of what your mortgage company will lend you in terms of principle, which in turn gives you an idea of what price range you can work with when searching for a home. Additionally, some sellers will give preference to pre-approved offers, as it reduces the chances of a failed closing due to financing difficulties.
Is Pre-Approval Important?
Pre-approval is important. In addition to the reason mentioned above, pre-approval cuts down on the amount of time it takes a mortgage company or broker to approve your mortgage. When you only have a limited amount of time to remove the subject clauses/meet the conditions of your offer on your potential home, this can make all the difference, and can cut down on the stress and uncertainty associated with the home buying process.
Secondly, pre-approval can save you money. When a financial institution pre-approves you for a mortgage, they are making a commitment to lend you a particular amount of money at a particular rate, guaranteed for 90 to 120 days. This means that even if mortgage rates go up during that period you are still guaranteed the rate that was offered when you applied.
When Should I Apply for a Mortgage?
It’s a good idea to apply for pre-approval as soon as you decide you are going to begin house hunting, if only to get an idea of your mortgage amount and future monthly payment. The mortgage approval process can take anywhere from a few hours to a few days, so once your application and paperwork is submitted you can feel free to start your home search. By starting early you will also have more time to shop your mortgage around to different financial institutions in order to find the best mortgage terms.
How do I Apply for Pre-Approval?
To apply for a mortgage, you need to gather the following documents and make an appointment with a mortgage lender or broker:
- Proof of employment / salary
- Proof of down payment (bank or investment statement)
- Debt and financial obligation information (bills, loans, lines of credit, etc.)
The lender will take down your information and calculate your pre-approval amount and mortgage rate, guaranteed for 90 to 120 days. Then it’s time to find a house!