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January 6, 2019

Mortgage Pre-approval: What’s the Big Deal?

by Christopher Porter
Buyers sometimes wonder why agents are always asking if they are pre-approved for a mortgage.  The short answer is to make sure the agent is searching for properties that they buyer is qualified to purchase.  When you make an offer on a property, your offer will be much more attractive to a seller.  You have taken a step to prove that you are a qualified buyer and the seller is not taking the house off the market for a deal that will not close.  A lot of sellers will not accept an offer without a preapproval letter.

What exactly is a preapproval?

The lender will look at your financial condition and determine how much mortgage you are eligible to obtain.   Information they will need includes:
  • 2 years of employment history
  • 2 years of residence history
  • Credit Report
  • Evidence of your income

Depending on your specific situation, the lender then may require additional documentation so that when it comes time to underwrite the loan, they are sure the loan will be approved.

Mortgage lenders are your best resource for determining how much money you will need and what an estimated house payment will be!

Once the lender is satisfied that you will meet the criteria, they will issue a preapproval letter to you indicating the amount of loan for which you are preapproved.

Self Employed?

You will need to provide 2 years of tax returns to confirm your income and if your business is stable.

I am Preapproved…  Now What?

  • Time to find the home of your dreams!  (I like to use a shopping metaphor – You know what store you can shop in and what you can’t)
  • Work with your Realtor to search for houses you would like to view.  See my blog post on Top Tips for Online House Hunting
  • Once you find the perfect house and get an accepted offer it is time to make a formal mortgage application.   Your lender will ask for more documentation to send the underwriters for final mortgage approval.
  • Enjoy your new home!

Where should I Go For A Mortgage?

There are many options for mortgages out there.  In a future blog post, I will discuss the pros and cons of your options.  My personal recommendation is to use a local mortgage banker.   A local lender will have a better idea of current markets and specific products that could apply in certain circumstances.    There are many great local resources.  Ask your REALTOR®  who they recommend!

  • Mortgage Broker
  • Mortgage Banker
  • Bank or Credit Union

Disclaimer:  I am a licensed REALTOR® and not a mortgage professional.   If you have specific mortgage questions, please talk to a trusted mortgage professional.

 

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