Getting preapproved for a home loan is an important part of the home buying process. Not sure how to get preapproval for a mortgage? Read on to learn more about pre-approval and what you need to do to get things started.
What is a Mortgage Pre-approval?
Mortgage pre-approval is an evaluation process done by financial institutions to determine how much you can afford to borrow when you buy a home. Lenders will look at your assets and income and run a credit check to see what kind of home loan you qualify for. If your preapproval is successful, you’ll receive an offer from the lender.
Getting preapproved for a mortgage is a way to show sellers that you’re able to obtain financing. Not only does it let you see what you can afford to borrow, but it can streamline and speed up the home buying process.
Preapproval vs. Prequalification
Prequalification is an approximation of what you might be able to borrow. It’s typically based on the information that you provide a lender and may include a credit check.
Preapproval, however, is when you’re officially preapproved for a mortgage loan. The lender will take the time to verify your information.
While a prequalification is essentially an estimate, a preapproval is an actual loan offer.
When You Should get Preapproved for a Mortgage
Ideally, you’ll want to have a preapproval letter in hand when you’re ready to start putting in offers on homes. Most preapproval letters are only valid for around 90 days, which is why it’s best not to start the preapproval process too far in advance.
It usually takes several days to receive a preapproval letter, but it could take longer if you’re self-employed or have a limited credit history. If you’re ready to start looking at homes, but you’re not ready to buy, you may want to get prequalified for a loan instead.
How to get Preapproved for a Mortgage
A preapproval letter from a lender will get you one step closer to buying a home. If you’re ready to move forward, there are several things you’ll need to do.
Find a Lender
Before you can kick off the preapproval process, you’ll need to find the right lender to work with. Getting prequalified for a home loan can be a great way to compare rates and narrow down your options.
In addition to looking for low interest, you should seek out a reliable lender that’s a good fit for your needs. Some lenders have programs for first-time buyers or alternate financing options for buyers who are self-employed.
Gather & Submit Documentation
To get preapproved for a loan, you’ll need to provide documents that verify your identity, income, and assets. To save time, you should make sure you have copies of paperwork like W2 forms, bank statements, brokerage accounts, and other records.
Not only will your lender need to confirm your down payment, but you’ll need to show where that money has come from. If someone has gifted you funds, for example, you should have a letter from the donor that confirms that the money isn’t a loan.
Preapproval usually involves a hard credit inquiry. It’s best to check your credit report before you try to get preapproved so that you can address any issues.
A higher credit score typically means lower interest rates. Try to pay down credit card balances and pay off any delinquent accounts before you talk to lenders.
Once you’re preapproved, you should receive a preapproval letter from your lender. You can use this letter to show realtors and homeowners that you’re capable of securing financing.
If you’re not happy with the offer, and you want to figure out how to increase your preapproval amount, there are several options you could pursue. You could:
- Find a co-signer
- Take steps to improve your credit
- Try talking to another lender
How Long Does Mortgage Preapproval Take?
The amount of time it takes to get preapproved for a home loan will vary based on how long it takes for the lender to verify your information. The process could take as little as 24 hours, but it could also take more than 10 days. While you shouldn’t try to get preapproved too far in advance, it’s best not to put things off until the last minute.
How Long is Preapproval Good For?
A preapproval letter will always have an expiration date. Most letters are good for 90 days, but some may only be good for 30 or 60 days. Check your letter in advance to see how much time you have.
Get Preapproved with Island Federal
If you’re not sure where to get preapproved for a mortgage, or you want to know how to increase your mortgage preapproval amount, reach out to Island Federal!
We have several mortgage programs that can make it easier for you to purchase your home. Our goal is to simplify the buying process and help you buy a home you love.