When shopping for your home, being pre-approved for a mortgage can make the entire experience a lot easier. This guide will help you understand the mortgage pre-approval process, making you better prepared when the time comes to sign on the dotted line.
Pre-approved vs. Pre-qualified
First things first, during your search you might see things for pre-qualified buyers
and pre-approved buyers
. The two are not the same, and understanding the difference will help. Neither will guarantee you a loan, but it can help you get closer to buying a home. Once you understand the key points, the loan approval process
is fairly straightforward.
- Pre-qualified: Pre-qualification is the first step you can take, but it's not mandatory. Pre-qualification is an easy way to find out a ballpark figure for how much a bank will loan you. Many banks and credit unions will do this over the phone and your credit history won't be checked. The loan officer will ask about your income, assets, debt and projected down payment-and then calculate what kind of loan you'd likely qualify for in just a few minutes.
- Pre-approval: The pre-approval process is a bit more involved and usually will require an appointment. The lender will gather the information it needs to offer you a loan including a check on your credit report (you may be charged a fee for this at the time of your appointment). You'll also have to bring information with you to document your identity and assets. The results of the pre-approval process are considered a good faith estimate.
The Pre-approval Process
Now that you are aware of the differences between pre-qualification and pre-approval you can begin to better understand the mortgage pre-approval process
. As mentioned above, the mortgage pre-approval process is a bit more involved than a pre-qualification, and neither process will guarantee you a loan.
When you're shopping for your mortgage, you'll have to proceed with the pre-approval process with multiple lenders to properly comparison shop. Without a good faith estimate, you can't truly compare the terms among lenders. The process for mortgage pre-approval can be lengthy and include many steps:
- Meeting with a loan officer who will further explain the process to you, the homebuyer - what will be done at each milestone and when out of pocket expenses should be expected. The loan officer will also discuss your situation including financials, credit and any special circumstances.
- You will complete the loan application, preferably in-person, and provide the lender with the appropriate documents - W2s, tax returns, bank statements, etc. At this point, your credit will likely be checked.
- Once the loan officer reviews the documents provided and makes any additional verifications - including running the loan through an automated underwriting system, the loan officer will issue a pre-approval letter informing you for how much you've been approved.
Once you've been pre-approved for a mortgage, you'll be able to start (or continue) looking for homes in your price range.
Becoming pre-approved for a mortgage doesn't guarantee you a loan, but it may give you a competitive edge when house-shopping because it signifies that lenders are ready and willing to loan to you.
TIP: Be wary that mortgage pre-approvals may only be valid for a certain amount of time.
Once you've found the home of your dreams, you're going to need help moving in! Be sure to visit Movers.com and fill out a free quote form
to be contacted by moving companies in your area. Movers.com also has all the information you need including city guides, decorating guides and home improvement guides.