In a seller’s market, it is a good idea to have your home loan pre-approved.
What is a Mortgage Pre-Approval?
When you are pre-approved for a mortgage, it means a lender has determined how much you can borrow, the loan programs for which you may qualify, as well as the interest rate for which you qualify. This assessment is based on things like your credit score, income, debts, and employment history.
A mortgage pre-approval is generally a written statement from a lender stating this information, which can be used to give sellers confidence that you’ll be approved for a loan after they accept your offer. Most pre-approval letters are good for 60 to 90 days.
Does Pre-Approval Guarantee a Loan?
No. Even if you receive a pre-approval letter from a lender, you may not get a loan from that lender and you are not guaranteed a specific interest rate or loan term. Regardless of pre-approval, a lender may require additional income and asset verification, as well as the satisfaction of other conditions, before giving you a loan. Pre-approval letters can be modified or cancelled if your financial situation or other conditions change. A pre-approval letter is not an offer to lend, a commitment to make a loan, or a guarantee of specific rates or terms.
Why Should You Get Pre-Approved?
There are many reasons why you should get a pre-approved mortgage such as:
- You will get an accurate idea of how much home you can afford. This can help to target your home search and ensure you only look at houses that are truly in your price range.
- A pre-approval letter also helps you prove to real estate agents and sellers that you’re a credible buyer and able to act fast when you find the home you want to buy.
- Some sellers require buyers to submit a pre-approval letter with their offers.
- A pre-approval letter can make your offer more attractive in a competitive real estate market. If you make an offer on a house without a pre-approval, your offer may not be taken as seriously as an offer from another person with a pre-approval.
What Details Are Required in the Pre-Approval Process?
A lender will generally start by asking for some basic information about you and your financial history. If you have a co-borrower, the lender will also need this information about them. Generally, a lender will then request your Social Security number and permission to pull your required credit report (and your co-borrower’s, if you have one). If the information you provide and the information obtained from your credit report satisfies the lender’s guidelines, the lender will make a preliminary determination in writing stating that you would qualify for a particular loan amount subject to the conditions outlined in your pre-approval letter.
Once You Are Ready to Buy – Contact an Experienced Real Estate Attorney:
When you have chosen the home you want to buy and you are ready to make an offer, contact an experienced real estate attorney, Mandi R. Hunter, to help you understand the real estate contract offer.
Kansas City Real Estate Attorney, Mandi R. Hunter, Building Legal Solutions.