Getting a mortgage pre-approval is a great first step towards buying your dream home. Pre-approvals show that you are in decent financial shape and can afford to purchase a home when the time comes. A pre-approval is not a full-on mortgage authorization, but it does imply that you’re a good candidate for home ownership.
You may have heard that you can also be pre-qualified for a mortgage. Being pre-qualified is not the same as a pre-approval. A pre-qualification is when a lender gives you an idea of how much you’ll be able to finance to buy your home. There are no commitments involved when you are pre-qualified, unlike a pre-approval where a lender has made an assurance to you that you’re entitled to funding.
The pre-approval process starts with you. It sounds like a cliché, but a lender isn’t going to seek you out to offer you a mortgage. First you should meet with your broker to discuss your financial situation. This discussion will involve your financial strategy, needs as a homeowner, possible down payment, and what monthly mortgage payments you can afford.
Additionally, your broker will explain different mortgage packages and will discuss what is right for you. For example, you may be better suited for a fixed rate mortgage over a variable rate one. After you’ve settled on the type of mortgage that best works for you, your broker will begin the application process.
For the application you will need to provide certain details about your financial situation such as employment status, income, assets and the amount you have for a down payment.
Once the application is completed, you will give your broker your authorization to have the lender pull your credit bureau report. At this point you just have to sit tight and wait to be pre-approved for a mortgage.
There are many benefits to having a pre-approval:
- Having a pre-approval can actually help you better manage your money since you’ll have an idea of what your monthly payments will be.
- The rate you’re given with your pre-approval is locked down between two and four months so even if mortgage rates increase in that timeframe, you’ll still have your rate secured.
- Pre-approvals are free and you are under no obligation to stay with the lender who offers it to you.
- Since you will have to provide proof of income and employment for a pre-approval, you’re getting a leg up on the documents you’ll need once you secure an actual mortgage.
For information on pre-approved mortgages, contact Northwood Mortgage™ today.