As part of the home buying process, many borrowers need to get pre-approved for a mortgage. A mortgage is a loan from the bank that allows the buyer to purchase the house they want. Applying for a mortgage in advance allows the customer to demonstrate their ability to afford the home they want. Pre-approval means that the potential buyer is already endorsed for a given sum and can expect to get the mortgage amount they want once they apply for it. The pre-approval process has many advantages. One of the most useful is that it helps buyers figure out how much home they can afford even before they search for the property.
Multiple factors will influence a buyer's ability to get pre-approved for a mortgage. Perhaps the most important of these components is your credit history. Your credit history is largely dependent on how well you pay your bills. If you make timely payments on a consistent basis, then you should have an excellent credit history. Struggles with fiscal problems in the past may reflect on your credit history.
All people have what is known as a credit score. The score is a reflection of your credit worthiness. Credit scores fall within a range from 300 to 850. Those with higher ratings will typically receive better mortgage rates. Three companies issue credit ratings. An applicant may get a higher score from one company and a lower rating from another.
During the pre-approval process, you will be given a realistic indication of exactly how much house you can afford to purchase. The lender starts with many factors such as your job history and any savings you might have. They then consider your credit score when coming up with a final determination of the amount you can borrow.
You may use your pre-approval to figure out a basic home buying budget. This further assists you in being realistic about a price range. The pre-approval lets you have a full look at your finances even before you start looking for a home. Being realistic about your price range makes it easy for you to put in a bid and increase the chances of acceptance by the seller because you have confirmation in writing.
Where to Get Pre-approval
Many companies can offer you pre-approval for a mortgage. In general, you can expect to apply for a loan from either a bank or a home finance company. Either institution can endorse your request for funds, but it is important to remember that a bank is a direct lender whereas most home finance companies represent mortgage underwriters. In any case, the pre-approval process is roughly the same with either a bank or home finance company. You will typically need to submit various types of paperwork to the institution, which will include pay stubs and an indication of any assets you might have such as equity in your current home and any securities you might own.