Getting preapproved for mortgage is the first step to the whole process, find out how it works.
Looking for a home on mortgage could be a challenging process, especially when you have to look for a lender and then wait for them to approve your application.
Mortgages are a common practice in the country, which means there are thousands of people willing to lend money to potential borrowers. And it also means that there are chances for lenders to pre approve your mortgage application too. Sounds good, right?
Let’s go step-by-step on what a preapproval on a mortgage application is and how long it takes for the application to get pre approved.
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What is Preapproval on Mortgage?
A preapproval simply means that a lender has gone through your financial situation, credit history, insurance records, debt and other notable data. After that, the loan officer determines how much loan you can borrow and how much monthly you will be able to pay for the mortgage.
But wait, being pre approved for mortgage doesn’t mean you will get the loan! After the preapproval goes on successfully, you will be issued a letter which you can take to potential sellers. The advantage of having pre approval gives the satisfaction to sellers that your history has been examined by a loan officer and you can actually afford the loan you’re asking for.
Mortgage Pre Approval Process
A mortgage pre approval process may sound like a long time consuming one, but if you have all documents ready and at your disposal, the process is a lot simpler.
It starts with filling out an application, every borrower must fill in all the important information there is. Essentially, a mortgage application consists of eight major sections:
- Type of Mortgage and Terms of the Loan
- Property Information and Purpose of the Loan
- Borrower Information
- Employment Information
- Monthly Income and Combined Housing Expense Information
- Assets and Liabilities
- Details of the Transaction
After you fill in this application, the next step is to provide all the required documents to process further with the scenario. Here is a potential list of all the documents you will need to provide to get the pre approval:
- 60 days of bank statement
- 30 days of pay stubs
- W-2 tax returns from the previous two years
- Schedule K-1 (Form 1065) for self-employed borrowers
- Income tax returns
- Asset account statements (retirement savings, stocks, bonds, mutual funds, etc.)
- Driver’s license or U.S. passport
- Divorce papers (to use alimony or child support as qualifying income)
- Gift letter (if funding your down payment with a financial gift from a relative)
Once all of this is done, the loan officer is required by law to send a proper documented letter which agrees to the completion of the process. This will include all of the information like the loan you can borrow, how much monthly payments are to be made, an outline of the rules and regulations with the mortgage etc.
How long does it take to get Preapproved for a Mortgage?
Typically it takes somewhere between one to three days if you have all your documents ready. The loan officer only has to go through the documents, verify the information and issue you a letter.
However, debts or extensive credit information could slow down the process and stretch it to a week even. It is always advisable for people to have all their recent documents and papers ready before they apply for mortgage. This way getting a preapproval on mortgage is easier and less time consuming.
How long does Mortgage Pre Approval last?
Once you’ve gotten the mortgage pre approval letter, you have to be mindful of the expiry date too. Typically a mortgage pre approval lasts somewhere between 60 to 90 days. There are times when people’s preapproval letter actually expires, what to do then?
In such a scenario, you can request for another letter. But this time you will have to provide all your credit information and documents again because in these 2-3 months a lot of information could have changed. Provided that nothing changed over the course of these months, getting another preapproval letter will not be hard or time consuming.
Pre Approval Mortgage Calculator
Before you even dive into the mortgage market looking for lenders, it is better to do a bit of homework on your own. To do this there are plenty of online preapproval mortgage calculators available through which you can get an estimate of how much loan you can afford and for how long you will have to pay monthly.
Here is a list of information that is needed for the calculator to run the algorithm, and you will have to:
- Enter your annual income before taxes.
- Enter the term of the mortgage you’re considering.
- Enter the interest rate for your mortgage type or use today’s mortgage rate.
- Select your credit score range.
- Tell us about your employment status.
- Tell us if you have a down payment.
- Tell us about past foreclosures or bankruptcy.
- Enter your monthly recurring debt payments.
Getting preapproved for mortgage is not a time consuming process, provided that all documents are provided and the application is filled. Please note that it is legally and morally required to be 100% truthful while filling out the application, any information that is fabricated or misleading will cancel the whole pre approval process for you. With that said, provide all supporting documents with your application to make verification easier for your case.
A pre approval is NOT a guarantee that you will get a loan for your house, it only gives peace of mind to loan lenders that you’re a serious buyer and can actually afford the property. Shop around to fetch the best mortgage deals!