What is a Mortgage Pre Approval and Why Should You Have One
October 17, 2022
Mortgage pre-approval letters are documents provided by lenders to home buyers. If you’re in the market for a new home, you should consider getting one of these documents, as they may prove helpful in securing your future home. Learn more about these documents and how they can help you.
What is a Mortgage Pre-Approval Letter?
As stated, pre-approval letters are documents that home buyers can obtain from lenders that express the lender’s willingness to provide a homebuyer with a mortgage. Lenders issue these documents after reviewing a homebuyer’s income, assets, debt, and more. The letter will specify what kind of loan has been approved and the assumed interest rate.
How Long is a Pre-Approval Letter Good For?
Most pre-approval letters are only valid for a certain amount of time—typically between 60 and 90 days.
How to Get a Mortgage Pre-Approval Letter
You must speak with a lender to get one of these pre-approval letters. The process of becoming pre-approved for a loan is essential if you want to get the best rates and terms. It’s also a good idea to check your credit score beforehand to ensure you qualify for a mortgage.
Items to collect include proof of income such as pay stubs and bank statements, W-2 tax returns, proof of assets, and identification and social security number. Once you have everything together, you can apply with a lender in person or online. The application often requires you to specify the type of mortgage and terms of the loan you expect, information on the property in question, and all the financial and identification information you’ve already collected.
Reasons You Should Have a Mortgage Pre-Approval Letter Before You Start Looking
Gives You a Budget for a Home
When you apply and obtain mortgage pre-approval, you know how much money you’ll receive from the lender and with what conditions. You can then look at your pre-approval letter as a budget and explore properties within your price range. Consider applying for pre-approval with multiple lenders to see the ranges offered by lenders. Then, look at the top end of that range as the maximum amount you can spend on a home.
Shows Home Sellers You Mean Business
Depending on the market, sellers tend to have several interested parties looking at their property. That means that the seller can choose between buyers. If you have a pre-approval letter, a seller knows that you’re able to purchase their property and that you already have a mortgage lined up with a lender, making you a more attractive candidate than a potential buyer without a mortgage pre-approval.
Helps You Close Faster on a Home
Buying a house is a long process. Most home buyers use real estate agents to help improve the overall process, but it may still take several months from the initial steps to closing. If you apply for pre-approval as you begin your home search, you’ll already have financing locked down when you’ve found a property you want to purchase. This can speed up the process of making an offer and closing on the home.
Start Your Home Search with The Anne Townes Team
If you’re interested in buying a home, consider using the help of a professional. Anne Townes team is a group of Chester County, PA, realtors who can help you find your dream home and get you in it quickly. Reach out to us today to get started finding the perfect property.