If you are purchasing a home on a mortgage for the first time, there’s no doubt that the process may seem a little intimidating. To make the process slightly easier, it’s a good idea to get pre-approved for the loan. Once you are pre-approved, you get a better understanding of how much you can borrow and what interest rate you will be charged. This can, in turn, help you compare various loans efficiently and zero in on the loan with the best terms.
Here’s how to apply for preapproval.
- Apply For Prequalification: Preapproval follows prequalification. When you apply for pre-qualification, you get an idea of how much you can borrow from the lender, based on which you can apply for pre-approval.
- Submit Supporting Documents: To apply for pre-approval, you will need to submit your details regarding your past employment history, recent pay stubs, bank statements, insurance contact information, recent W2 tax returns, and outstanding debt value.
- Lender Verifies Your Information: Once you submit the necessary documents, the lender’s mortgage consultants will verify your details and check your credit score. If you’ve met the necessary conditions, you will be pre-approved for the loan.
- Get The Pre-Approval Letter: Make sure to collect the pre-approval letter from the lender. The letter should include the type of loan, amount you are approved for, and an estimate of the interest rate you will be charged. It’s important you do this because many real estate agents will only show you homes if you have a pre-approval letter.
Remember that getting pre-approved for a home loan gives you a competitive advantage. However, don’t assume you will get the home loan just because you were pre-approved. Once you decide which property you will be buying, the lender will re-assess your application. You may also be asked to submit other documentation regarding your financial situation, so ensure you do this without any delay.
Once the lender approves your loan application, you will be notified of the interest rate, which you should try to lock in so it doesn’t change before you close on the loan. Once this is done, you can make the down payment and pay the closing costs to proceed with the purchase.
