When it comes to buying a home, there are plenty of choices to make and options to weigh. One move that offers aspiring homebuyers very clear benefits is getting preapproved. In fact, learning how to get preapproved for a mortgage should be one of the first things that you do when you get serious about buying a home. While it might seem a bit like putting the cart before the horse, experts actually recommend that you get preapproved before you start your home search.
How to Get Preapproved for a Mortgage
Getting preapproved for a mortgage offers more feedback than just a thumbs up or a thumbs down. Understanding what it means to be preapproved for a mortgage and how it can help you with your home search makes it easier to see why so many people choose to get preapproved. However, it’s also important to recognize the limits of a mortgage preapproval.
What Does Being Preapproved Mean?
As Credit.com explains, being preapproved for a mortgage means that a lender has tentatively reviewed your financial situation and decided that you’re likely able to borrow up to a certain sum. They’ll even provide you with a letter stating this information that you can share with other interested parties.
The Benefits of Getting Preapproved for a Mortgage
Why do would-be homebuyers go to the trouble of working with a lender to get preapproved? As Credit Karma points out, getting preapproved offers substantial benefits. For starters, you’ll know how much you can likely borrow. That helps you streamline your home search by establishing a price range to aim for when shopping. The preapproval process may also uncover problems with your credit. While credit issues are always frustrating, it’s certainly better to find the issues and fix them early on than to discover them later and end up losing out on a house you love. Having a preapproval letter also increases the odds that you’ll be seen as a serious buyer by real estate agents and sellers. Without this letter, you may be passed over in favor of other buyers who are preapproved. Finally, getting preapproved can speed up your actual loan approval. After all, much of the information and documentation that you provide for a loan preapproval carries over to the actual loan application, so getting preapproved gives you a head start on the process.
Getting Preapproved for a Mortgage
If you’re worried about the nuts and bolts of how to get preapproved for a mortgage, don’t be. It’s a fairly simple process that generally produces results in a matter of hours or days. You simply need to gather the necessary documentation and connect with your chosen lender. What type of documentation will you need? According to Investopedia, you’ll want to gather the following items for your appointment with your lender:
- Identification: Be ready with your driver’s license and Social Security number. You’ll also be asked for a signature giving permission to pull your credit reports.
- Income: It’s best to have recent pay stubs, W-2 statements, tax returns, and proof of any other income for the last two years on hand.
- Assets: Bring statements for bank and investment accounts to offer proof of your assets.
- Credit: You won’t need to bring proof of your credit score; your credit report will provide that. However, it’s a good idea to be aware of what your lender will see. Remember that a higher score is preferred.
- Employment: Lenders prefer to work with borrowers who have a history of stable employment. Borrowers who are self-employed or who have recently changed jobs or industries may need to jump through some extra hoops to secure a loan.
The Limits of Mortgage Preapproval
Getting preapproved for a mortgage is a great start to your journey towards homeownership, but it’s just a beginning. As The Balance notes, being preapproved for a mortgage is not the same as being approved. It’s also not a guarantee. There’s still a chance that you might not be approved for the loan that you’re seeking.
Are you ready to get preapproved for a mortgage? Reach out to PrimeLending Denver today to discuss your options.