A mortgage pre-approval can be a very helpful part of the sometimes confusing process of purchasing a home. Taking the extra step may save time in the long run. Normally, home buyers who are interested in purchasing a home, whether for the first time or not, need to secure a loan through a lender. Securing a loan is an intricate process that involves a number of elements such as a close examination of financial history and scrutiny of tax documents. Home buyers should be aware of the 6 things to have for mortgage pre-approval before beginning. Going through the pre-approval process will help buyers get an idea of the mortgage loan amount they may ultimately receive and will point out any pitfalls or issues that home buyers need to address.
One important detail to keep in mind while working through the mortgage pre-approval process is this: a pre-approval does not guarantee a loan amount. While lenders are happy to offer the pre-approval services they have available, they will also caution buyers against expecting to receive a loan for the same amount the pre-approval states may be available. Once a pre-approval has been completed, lenders will use that information to come up with a mortgage amount that will be a good fit for the buyer within the definition of what is best for the lender. To find the right mortgage loan amount, the lender will look at a number of other factors beside what the pre-approval tells them.
The pre-approval is just one step in the process, so it’s important for buyers to have all their other details in order. A lender will also take a very close look at a buyer’s financial history. In order to speed the process along, buyers should have the necessary paperwork ready to go, rather than waiting until the last minute when the lender asks for them, which only delays the process. Many lenders will supply a list of documentation they need to see in order to determine an appropriate loan amount. For business owners, tax documents and “profit and loss” statements will be requested. For individuals, proof of income, tax returns, income from alimony or child support and even divorce papers may be required. For all borrowers, lenders will run a credit history check which will show how consistent the potential buyer has been in the past paying off other borrowed amounts.
The biggest advantage to the mortgage pre-approval process is that it will paint a clearer picture of what borrowers can expect. Remember that the pre-approved amount may or may not be the same as the actual mortgage amount, depending on a variety of factors. The pre-approval process is not required to obtain a mortgage, but many borrowers like knowing ahead of time what to expect.