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Frequently Asked Questions
What is mortgage pre-approval?
Mortgage pre-approval is a pivotal step in securing your home loan. Lenders would evaluate the amount you could potentially borrow and what kind of interest rate they would charge for that money if it was lent to you.
Why should I get pre-approved for a mortgage?
It is advised to get pre-approved before looking at homes to make your next home purchase go as smoothly as possible. A mortgage pre-approval letter can help you stand out among other buyers and show sellers that you are willing, ready, and able to close the deal. It also helps during the search process because it lets you know how much you should spend on your new dream home!
How do I get pre-approved for a mortgage?
The first step to getting pre-approved for a home loan is finding the right lender. We will connect you with a find a licensed lender in your area. The mortgage pre-approval process typically includes providing your personal financial information and submitting a mortgage application.
Your credit score, credit history, debt-to-income ratio, employment history, assets, and income can help determine what kind of mortgage you’re eligible for. The lender considers these factors when evaluating your application and offers a deal that’s more suitable to your situation.
Pre-qualification vs. Pre-Approval
The mortgage pre-qualification process is essentially the mortgage industry’s version of job interviewing. You provide an overview of your finances to a mortgage lender, so he/she can give you an estimated loan amount based on what they know about you at that time. The objective is to weed out applicants before they move forward in the mortgage application process.
A mortgage pre-approval process, on the other hand, is more like a job offer. You fill out a mortgage application and provide your Social Security number so that a lender can do an extensive credit check to make sure you’re not going to default or otherwise back out of paying for your mortgage. When you submit your application for a mortgage, the lender will check your credit with a hard inquiry in order to determine your eligibility.
When to get a Pre-Approval
You may be thinking, “should I get a mortgage pre-approval?” Mortgage pre-approval letters are not set in stone, so you should try to get them as soon as possible. It’s a great idea to do so before you start your house hunting. Mortgage pre-approvals are typically valid for 60 to 90 days and can expire after that time if your finances or credit profile changes. When you are looking for a new home, it’s essential to be prepared. Seeking pre-approval for a home six months to one year in advance of your serious search will get you a better position when it comes time. You’ll also be able to save more money and have better credit with this kind of planning, giving yourself an edge over other potential buyers.
Things not to do when looking for a home and applying for mortgages
You do not want to make any financial mistakes when looking for a new home. Here are ten things you should avoid after applying for a mortgage in order not to sabotage the process. Apply these tips by following them step-by-step so that there will be nothing standing in your way of getting into that new house or condo!
1. Don’t forget to monitor your credit.
2. Don’t forget your bills.
3. Don’t make any large purchases.
4. Don’t apply for a new credit card.
5. Don’t max out your credit cards.
6. Don’t close any of your credit cards.
7. Don’t co-sign on loan.
8. Don’t change your job.
9. Don’t change your bank account.
10. Don’t make big deposits into your bank account.
Does Pre-approval guarantee a loan?
A pre-approval letter is a good sign, but it will not guarantee you’re approved for the loan. It simply means that there’s an opportunity for you to be approved if and when your application clears underwriting.
What should I do if my mortgage pre-approval is denied?
Mortgage pre-approvals are denied for many different reasons, but it’s not the end of the world. The most common reasons are insufficient income or creditworthiness to qualify. Your mortgage lender can offer advice on how to improve your chances for approval and provide a list of other mortgage options that you might be eligible for.
You can start by fixing your credit score and errors on your credit report, then work on reducing debt and saving up more money for a down payment to show that you’re serious about owning your own home!