The Pre-Approval Process for Mortgage
Possessing a mortgage pre-approved may make purchasing a house lot easier. If a seller has more than one deal, showing him your lender has pre-approved the amount of your bid could be a deciding factor in your favor. Additionally, it can help you decide what price range to store in, and, once you find a house, it is going to save time in closure because a number of the newspaper is currently completed.
Types
Even some property professionals confuse pre-qualifying to get a mortgage with pre-approval, based on Realty Times. When you pre-qualify, you describe your own fiscal situation to a lender and get an estimate of how big a mortgage you would qualify for. To be pre-approved you need to record your fiscal situation; as your claims will be checked and confirmed, pre-approval carries additional weight.
Requirements
Before pre-approving you, a lender will need evidence of your earnings, in the kind of a couple of years of federal tax returns, current bank statements, and current pay stubs or investment earnings statements. A lender also will need copies of credit card statements and other monthly obligations to see just how much of your earnings is currently obligated. This way the lender is going to find out how big a monthly payment you can handle.
Outcomes
The end result of this pre-approval process is a letter stating that the size of the mortgage you have been pre-approved for. This is not a guarantee of a mortgage, Realty Times states. Changes in interest rates before you shut could result in your lender reconsidering. But you may use the letter as evidence to sellers that your offer on a house has a good prospect of going all the way to closure.
Precautions
Mortgage charges are generally 2 to 7% of the house price, based on Freddie Mac, a government-sponsored corporation that supports the home loan industry. Fees include the price of processing your application, underwriting the loan, creating a credit check, conducting a title search and getting the house appraised. Consult your lender to get a good-faith estimate of their closing prices to make sure that you’re prepared to cover them.
Factors
You are able to ask more than one lender to pre-approve you, and compare interest rates and charges. You will most likely need to pay each lender, though, at least to the price of a credit rating.