Entering the housing market can often be overwhelming and stressful, especially concerning finances. Knowing how much you can afford to buy a home, what type of loans you can be approved for, and the interest rate you may be looking at can help make the homebuying process easier. A mortgage pre-approval will determine these factors and more.
Here is a breakdown of the mortgage pre-approval process to help determine if getting pre-approved for a home loan is right for you!
What is a Mortgage Pre-Approval?
A mortgage pre-approval helps determine how much money you can borrow to buy a home. During the pre-approval process, a loan officer will examine your finances, including your income, debt, assets, and credit history, to determine how much you can borrow related to specific types of loans.
However, mortgage pre-approvals do not guarantee you will get a loan for the home you are interested in purchasing. The mortgage pre-approval process refers to determining how much money you can borrow to purchase a home. However, the final decision is based on many other factors.
What Documents Do You Need for a Mortgage Pre-Approval?
Mortgage lenders or loan officers will often ask for the following documents:
- Proof of income.
- Verification of employment.
- Identification (driver’s license, social security card).
- Credit history.
- W-2 statements.
- Pay stubs.
- Bank statements.
- Federal tax income forms.
Once you have submitted all your information to your mortgage lender or loan officer, you should receive your pre-approval letter within a few days, informing you of whether you’ve been pre-approved and for how much.
Related: How to Get Pre-Approved for a Mortgage
Why Should You Get a Mortgage Pre-Approval?
Even though mortgage pre-approvals do not guarantee that you will get a mortgage loan, there are some advantages.
- Mortgage pre-approvals give real estate agents the confidence to work with you. A pre-approval letter shows real estate agents that you are a serious buyer and helps real estate agents narrow your home search to properties in your price range.
- Mortgage pre-approvals make house hunting easier. Since mortgage pre-approvals determine how much you can afford, getting pre-approved makes the house-hunting process easier by narrowing the homes within your budget.
- Mortgage pre-approvals give sellers confidence in your offer. A pre-approval letter shows sellers that you are a serious buyer. Mortgage pre-approvals also show sellers that you can finance the amount you have offered.
- Mortgage pre-approvals can help speed up the closing process. You submitted the needed information for getting a mortgage during the pre-approval process, so it is already in the system. As a result, you have already completed most of the mortgage process, allowing you to focus on preparing to move into your new home.
Are Mortgage Pre-Approval and Mortgage Pre-Qualification the Same?
These terms are often used interchangeably but do not have the same meaning.
A mortgage pre-qualification does not review your financial background as thoroughly as a pre-approval. With a mortgage pre-qualification, you do not provide as much financial information, and your lender or loan officer may not request a hard credit inquiry. So, since you do not submit the supporting documentation during the process, your lender or loan officer can only give you an estimate; therefore, the approval amount, the type of loans you qualify for, and the interest rate can change.
Mortgage pre-approvals require more in-depth information, such as pay stubs, credit history, W-2 forms, and more, to give you more precise information to help you determine the best financial decision when getting a home loan.
Related: Mortgage Pre-Qualification vs. Mortgage Pre-Approval: What You Need to Know
Marimark Mortgage is based in Tampa, Florida, and proudly serves homebuyers and homeowners in all of Florida, Virginia, and Pennsylvania.
We specialize in conventional home mortgages, FHA, VA, USDA mortgage options, refinance loans, and reverse mortgages. We’ve worked extensively with cash-out refinancing, and help clients to lower their monthly mortgage payments.
To get started with a mortgage to buy your next home, please fill out our Quick Mortgage Application, or contact us direct.