What it Means to be Pre-Approved for a Mortgage Loan
If you’re a first-time home buyer, terms like pre-approval and pre-qualification may be synonymous in your brain. However, contrary to public opinion, there is a difference between the two.
Before you begin your home buying journey, make sure you’re up to speed about what it means to be pre-approved for a mortgage, why you should get pre-approved, and the pre-approval process. We cover all of the above in this article!
What Pre-approval Means
Preapproval means the bank has taken a hard look at your financials and determined you are creditworthy enough to take out a home loan for a given amount. It means that you are a serious buyer and can afford mortgage payments, a down payment, and closing costs.
Why You Should Get Pre-Approved
Quite simply, you should get pre-approved by a mortgage lender as soon as you’re ready to put an offer on a home because it strengthens your offer. Sellers are much more likely to entertain your offer if you have proof that you can secure a mortgage – which makes it more likely that you’ll complete the purchase. In fact, many home offers are turned down by sellers if the buyer is not pre-approved for a mortgage.
Pre-approval also gives you a concrete idea of you how much you can afford. By getting pre-approved, you won’t experience that soul crushing moment of realizing you’ve been shopping for houses that cost $50,000 more than what you can afford.
Pre-Approval vs. Pre-Qualification
Pre-qualification is a general analysis of your financial situation. This analysis is solely based on the information you provide and is an estimate of how much might be able to borrow. Mortgage lenders will not ask for any documents that verify the financial information you provide, but they will perform a credit check. Once you get prequalified, you can discuss different mortgage options and with with your lender to identify the best mortgage for you.
Pre-approval, on the other hand, is a hard analysis of your financials. Pre-approvals specify the actual home loan amount that you’re eligible for. The lender will require you to submit a formal mortgage application and a slew of documents to verify your financial information. They will also pull a full credit report. If you are preapproved, you will receive a preapproval letter, which is an offer to lend you a specific amount. This offer is good for 90 days.
How to Get Pre-Approved
Along with filling out an application, you will need to provide the lender with a lot of documents, including:
- Two years of tax returns
- Pay stubs
- Driver’s license or Government Issued ID
- Social Security Number for credit report
- Asset information
For a full list of documents required to get pre-approved for a mortgage, check out this Mortgage Application Checklist. Once the mortgage lender has received your information and processed it, you will either be approved or denied for a home loan. If approved, the lender will inform you how much they are willing to loan you, as well as provide you with various mortgage rates and down payment options.
Why Get Pre-Approved through Herring Bank?
Herring Bank’s team of mortgage lenders are committed to helping you turn your home ownership dreams into reality. One of our dedicated lending experts can pre-approve you in no time! You can also get started online, here! Our expert mortgage loan originators are ready to answer any questions you might have and help guide you through the home buying process from start to finish.
Chat with a Herring Bank mortgage expert to discover how we’re lending the way to your next home.
Request a call or call us at (866) 236-4779 to get started!
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