Why Get Pre-Approved for a Mortgage

Benefits of being a preapproved buyer

One of the most common first-time home buyer questions is, “Should I get preapproved for a mortgage?” The answer is often yes.

Securing a mortgage preapproval means you’ve passed a lender’s first look. Your financial strength and buying power have been preapproved by a mortgage lender, giving you — and sellers — greater confidence in what you can afford. You’ll know you’re in good shape to move forward with an offer on a home because a lender has examined your finances.

A mortgage preapproval is also a signal to sellers that you’re serious about a home purchase and ready to commit. When sellers see you have a mortgage preapproval in hand, they know you’re prepared to buy and can feel comfortable that the deal should move ahead smoothly.

Taking this important step can save you a lot of headaches and heartbreaks down the road.

Benefits of being a preapproved buyer

Why get preapproved for a mortgage? With a preapproval in hand, you can:

• Know what you can afford: A preapproval tells you what price range to target. It also shows you what you can expect your mortgage payments to be.
• Pinpoint problems early: Because lenders review your information when you apply, any qualification issues they may uncover can be dealt with early in the process.
• Show your real estate agent you’re prepared: Being preapproved for a mortgage lets your agent know you’ve done your homework and are ready to buy.
• Reassure sellers you can make it to the finish line: Sellers want to know ahead of time that the deal is going to work. A preapproval shows them you’ve already spoken with a lender and have the purchasing power to buy.
• Speed up closing: Preapprovals can also streamline the loan process because the lender has already received and reviewed your financial documents.

How the preapproval process works

Lenders want to know that you have the means to repay a loan before they commit. That’s why preapprovals are useful: They show that a lender has already reviewed your finances and has tentatively agreed to lend you up to a certain amount (provided you meet certain conditions). Here’s how it works:

1. Choose a lender: Look for a lender with strong mortgage industry experience, quick approvals, and highly rated customer service.
2. Fill out and submit an application: Provide details such as your name, address, date of birth, Social Security number, employer, income, assets, and other info.
3. Upload documents: Submit paperwork that proves the information you’ve provided. Lenders typically require proof of income (pay stubs, tax returns), credit history, bank statements, and details about any debts.
4. Receive a preapproval letter: If everything checks out, the lender will send you a mortgage preapproval letter, which you can use as you shop for homes.

Documents you’ll need

You may be able to speed up the preapproval process by gathering these documents ahead of time:

• W-2s
• Current pay stubs
• Tax returns (usually for the last two years)
• Bank statements for each of your accounts (usually for the last two months)
• List of debts, such as student loans, personal loans, credit cards, and car payments

You may also need a driver’s license or other proof of identity.

Your lender’s response

Once you’ve submitted your documentation, the process usually moves swiftly. Your lender will either:

1. Preapprove you
2. Preapprove you with conditions
3. Deny your application

Getting preapproved is a positive step. Once you have your preapproval and find the home you want, your lender will update your file with the property address and schedule an appraisal.

Being preapproved with conditions is still encouraging. It means there are minor tasks left, such as providing missing documents or answering additional questions, to achieve full preapproval.

If you’re denied, your lender will explain the reasons clearly. You may need to work on improving your credit score or addressing income or banking issues before reapplying.

Get preapproved for a mortgage today

A mortgage preapproval gives you a clear budget and a competitive edge. Get started today by contacting the mortgage experts at AmeriSave for additional home-buying tips and to learn more about your preapproval options.

FAQ

Is getting preapproved for a mortgage worth it?

Preapprovals give you a ton of information about what you can expect a mortgage to cost according to your personal circumstances, and they’re usually free. Skipping preapproval means you might be making decisions without knowing your true budget or what a lender could charge based on your finances and credit score.

What are the advantages of being a preapproved homebuyer?

Preapproved buyers know their price range before they ever set foot in an open house. Having a lender verify your financial info early on also means you can make a strong offer on the home you want because the sellers know you’ve already been preapproved to close the deal.

When should I get preapproved for a mortgage?

It’s typically best to get preapproved early in the home-buying process, before you begin shopping for homes. That way, you don’t waste time browsing for homes beyond your budget and can streamline the closing process once you’ve made an offer.