Are you thinking about buying a home? Before you start house hunting, one of the most important steps you can take is to get pre-approved for a mortgage. At JG Mortgages, we’ve guided countless clients through this process, ensuring they are well-prepared to make a competitive offer when they find their dream home.
In this blog post, we will be talking about some of the important steps that you need to take to gain mortgage preapproval as quickly as possible.
What is a Mortgage Preapproval?
A mortgage preapproval is a lender’s agreement to give you a specified amount of money on certain terms to buy a house. This is determined after a thorough evaluation of your financial condition, which includes your income, obligations, credit history, and assets.
When you’re preapproved, you’ll receive a letter outlining the loan amount, kind, and conditions for which you qualify, providing a clear picture of what you can afford.
What is the Difference Between Preapproval and Prequalification?
Mortgage preapproval and prequalification are sometimes confused, however they are not the same. Prequalification is an early assessment of your financial situation, usually based on data you have reported yourself. It aims to give you an idea of how much you may be able to borrow but does not hold the same weight as a preapproval.
Preapproval, on the other hand, is a more detailed process. Lenders will need to verify your financial information, including your credit score and documentation. Because preapproval includes a more thorough assessment, it puts you in a much better position when making an offer on a house, as sellers view it as confirmation that you are a serious and qualified buyer.
In short, preapproval is simply a more thorough process for mortgage lenders to verify how trustworthy you are to determine whether they should lend to you or not.
Why Would I Need Preapproval?
Getting pre-approved for a mortgage has plenty of benefits. Firstly, it sets a clear budget, allowing you to narrow your search to properties in your price range.
Second, it makes you a more appealing buyer to sellers and real estate/mortgage brokers by showing that you are financially prepared to buy a property. Finally, preapproval can speed up the closing process because most of the financial verification is completed ahead of time.
How To Get Preapproved for a Mortgage
Understanding why it is important to get preapproved is just the first step in streamlining your mortgage, there are several other steps you must complete before you submit your final application for a mortgage, here are some of the key steps:
1 – Work Out a Budget
The first step you need to take when you choose to get preapproved will be to work out a budget to work with for the rest of your home-buying journey. This will be the basis of all of your future conversations about your home.
You should think about what your income is, any existing debts that you may have and, most importantly, how much you are comfortable with paying for a house in the deposit and monthly.
2 – Check Your Credit Score
Your credit score is simply a way for banks and lenders to know how trustworthy you are at paying back owed payments. This has a big impact on the mortgage rates and conditions you can qualify for. It is recommended that you verify your credit score before asking for preapproval.
You can check your credit score on many applications and will need to build up a reliable background of paying back owed payments to increase it. Things like paying off bills, debts and setting up standing orders can be a great way to improve your credit rating.
You will typically need a credit score of at least 620 to qualify for a mortgage – but the higher the score you have, the much better chance you have for a lender to loan you a large amount of money.
3 – Get the Appropriate Documents
There are several forms that you will need throughout the home-buying process that may need to be provided during your preapproval. These documents include:
- Proof of identity
- Proof of income
- Proof of assets
- Proof of debt and expenses
- Down payment information
4 – Look For Potential Lenders or Brokers
The next step should be to look for any potential lenders that may accept your application, if this is something that you do not understand fully or would simply like to defer to another person, a mortgage broker may be a useful investment.
At JG Mortgage Services, we have a team of expert mortgage professionals who can help you with all of your mortgage preparation needs. We can help throughout the entire process of preapproval and will stay up until your home has been purchased should you need us.
5 – Submit Applications
Once you have completed all of the previous steps, you will be able to submit your approval application. This can be done both online and on paper, or you could let an expert mortgage broker handle all of this for you.
How Long Does Mortgage Preapproval Last?
The preapproval process will typically take anywhere between 30 and 90 days. Each preapproval letter will normally have an expiry day in which the quote given will expire and you will need to go through the whole process again.
This length of time can vary depending on the lender you have chosen so it is important to act promptly when you get your letter back.
Key Takeaways
- Mortgage preapproval is an essential step in the home-buying process, offering a lender’s commitment to providing you with a specific loan amount.
- Preapproval vs. Prequalification: Preapproval is more in-depth and carries more weight than prequalification.
- Preapproval gives you a clear budget, makes you a stronger buyer, and can speed up the closing process.
- The Steps to Get Preapproved are: Work out a budget, check your credit score, gather your documents, research lenders or brokers, and submit your application.
- Preapproval typically lasts 30 to 90 days, after which you may need to reapply.
