Applying for preapproval for a mortgage is a straightforward process that requires some paperwork and, in many cases, just a few days for the lender to verify your personal and financial information. Each lender’s process is different, but they’ll generally review your credit history, income, assets and debts before deciding to grant a preapproval and, if so, for what amount.
Gather the appropriate documents
Lenders will want to verify your identity, credit history, employment history, income and financial assets to issue a preapproval. They’ll likely ask you to fill out a uniform residential loan application (almost everyone calls it a 1003 or “ten-oh-three” — here’s an example).
The 1003 application asks for your personal information, financial information and loan information, including …
- Bank accounts, retirement and other accounts
- Any other assets you have
- Property you own
- Income and employment details
- Employer contact information
- Debts you owe or other liabilities
Your lender will also likely do a hard credit check, and may require additional documents based on your individual situation, such as pay stubs, tax returns or bank statements.
Get quotes from different mortgage lenders
Just as you want to get the best deal on the house you buy, you also want to get the best deal on your home loan.
Every lender has different guidelines and interest rate options, which can have a big effect on your monthly payments. If you only get preapproved with one lender, you’re stuck with what it has to offer. When you get preapproved with multiple lenders, you can choose the offer that’s best for you. Many lenders offer the ability to apply for preapproval, including Bank of America, Better Mortgage and Rocket Mortgage.
It’s important to do your homework before choosing potential lenders. You should research each lender and even the loan officer who would be handling your mortgage — there can be a big difference in knowledge and experience, depending on who processes your application.
After you choose some lenders, you’ll provide the information needed to complete the preapproval application process. An underwriter may examine your preapproval application to determine how much you can borrow. If an underwriter hasn’t reviewed your application, you haven’t been fully preapproved — so be sure to ask about the status of your application during the process.
Once the lender has all the documents it needs, it typically only takes a few days for the lender to let you know whether you’re preapproved and how much you’ve been approved for. But the preapproval process can take longer if you have a past foreclosure, bankruptcy, IRS lien or poor credit.
If you’re shopping for a mortgage, you have a window of time where multiple credit inquiries by lenders are counted as a single inquiry for your credit scores. The window is typically 14 days — though it could be longer.
Since it’s difficult to know which credit-scoring model a lender will use, you’ll likely want to get all those rate quotes within 14 days.
Don’t get preapproved too far in advance
When you receive your preapproval letter, it will probably say it’s good for 30 to 90 days. Since that’s a relatively short period, you’ll probably want to wait to get preapproval letters until you’re ready to start seriously shopping for a home. And remember, a preapproval is only a conditional approval. If you rack up more debt, change jobs or reduce your savings, you could get denied when you go to get final mortgage approval.
Choose a lender
Once you make an offer on a house, it’s time to get official loan estimates from your list of potential lenders. After you apply for a mortgage, the lender must provide this estimate within three business days of receiving your application. The document will include estimates for your interest rate, monthly payment, closing costs, taxes and insurance, as well as details on how the loan works, such as any penalty fees. After you review and compare the estimates, you can choose the lender that best meets your needs and work with it to complete your application.
Source: creditkarma.com ~ By: Jennifer Brozic ~ Image: Canva Pro