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Why You Should Get Pre-Approved for a Home Mortgage Loan?

If you are looking for a home, whether it is your first home or your tenth, you will need to deal with a home mortgage loan sooner than later. Since you have to deal with getting a mortgage anyway, it is a good idea to get pre-approved for the mortgage you need before you begin shopping for a home.

The advantages of getting a pre-approved home mortgage loan

One major advantage of getting pre-approved for a home mortgage loan is that it gives you a firm idea of how much you can borrow (or if you can borrow at all especially after the subprime loan crisis, it is harder to obtain a home mortgage loan now). If you know how much you can borrow and how much you have for a down payment, you can easily set a maximum price as you search for a home. You will not waste countless hours looking at homes, only to find out afterwards that you cannot afford the mortgage.

In addition, the real estate agents will be willing to spend more time assisting you in your home search if they know you are pre-approved for a mortgage loan. Sellers will also be more motivated to work with you if they know you are able to afford their asking price. Sellers will also take any offer you make more seriously if they know you are pre-approved for a mortgage. Pre-approval is a big help to the seller and the realtor, as well as the potential home buyer.

Steps to obtain a pre-approve home mortgage loan

During the pre-approval process, the potential buyer will speak with a mortgage lender about his or her financial situation, as well as any special circumstances or concerns he or she may have. The mortgage lender will need to verify all income information provided by the home buyer, so it is important to bring along tax returns, pay stubs and other information to support the income you are claiming. The mortgage lender will also want to see W-2 forms for the past two years, pay stubs from the last three months and bank and brokerage statements from the last three months.

The mortgage lender will use the financial information provided by the borrower to obtain approval from a lender up to a specific loan amount. The mortgage lender will provide the potential home buyer with information about the monthly payments on the mortgage loan and any closing cost information.

It is important for the potential home buyer to start the pre-approval mortgage loan processing as soon as possible. One reason for allowing extra time is the importance of credit reports in the pre-approval and mortgage loan process. Unfortunately, it is not unusual for credit reports to contain inaccurate information, and a mistake on your credit report could mean that you are charged a higher interest rate than necessary, or even cause you to be turned down for the loan. It is a good idea for the borrower to get a copy of his or her credit report before starting the pre-approval process. That way the borrower can find and correct any problems before the mortgage loan process even begins.

The mortgage lender will review the mortgage loan application with the potential home buyer. The application form will ask questions related to the borrower's current residence, employment status and salary, marital status and other relevant information. The loan application will also contain a number of disclosures the borrower is required to sign.

After the home mortgage loan application is reviewed and signed, the mortgage lender will submit the paperwork through the "Automated Underwriting" process. With this automated process, an answer to the loan application is typically received within minutes of submission. Once the paperwork is approved, the mortgage lender will issue a pre-approval letter which outlines the terms of the mortgage approval. The real estate agent will request a copy of this letter before they begin showing you properties. A copy of the pre-approval letter will also be provided any time the potential buyer makes an offer on a property. Get your free and best mortgage rate quotes from multiple lenders, and start your pre-qualification process now!


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