Overview:
If you are preparing to purchase a home, it will be in your best interest to get a mortgage preapproval. A mortgage preapproval is a lender’s conditional approval for a home loan in the form of a preapproval letter. It helps you understand how much you may be able to borrow to purchase a home. Additionally, a preapproval letter makes you more attractive to sellers (who often want to see a preapproval letter before accepting your offer on their home). The preapproval process alerts you to potential problems that may affect your ability to get a loan. To get preapproved, you will need to provide your lender with documents that they will use to verify your personal, employment and financial information. This process could take as little as a few minutes to 24 hours or 10 days or more, depending on the lender. Please bear in mind that the letter may have an expiration date (typically 30 to 90 days). Since this time-frame is a relatively short period, it will probably be best to wait to get preapproval letters until you are actually ready to begin shopping for a home. However, a preapproval is only a conditional approval. If you accrue more debt, change jobs, or deplete your savings, you may receive a denial when you go to get the final mortgage approval.
Understand the Difference Between Prequalification and Preapproval:
Both "mortgage prequalification" and "mortgage preapproval" are two key steps in the mortgage application process. Some people use the terms interchangeably, but there are significant differences between the two that you should understand. Prequalification, or "prequal," is a cursory overview of your income, assets, debt, and credit by a lender—but you do not have to provide any paperwork. It gives you only an estimate of the amount that you can borrow. On the contrary, a mortgage preapproval carries more weight because it consists of a more comprehensive application process. A pre-approval informs you of exactly how much you are eligible to borrow to purchase a home.
Review Your Finances:
To avoid any surprises, take a close look at your household income, monthly expenses, investment bank accounts, and credit score before applying for a preapproval. You are entitled to a free copy of your report from each of the three major credit bureaus — Equifax, Experian, and TransUnion — at AnnualCreditReport.com. Analyzing your current expenses will help you determine how much you are comfortable spending each month—which may be less than what a lender will offer—and relect how much of a down payment you can make.
Gather the Appropriate Documents:
Lenders will want to verify your identity, credit history, employment history, income and financial assets to issue a preapproval. They will most likely ask you to fill out a uniform residential loan application (almost everyone calls it a 1003 or “ten-oh-three”).
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 are desiring the best deal on the home you purchase, 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, then you are stuck with what that one has to offer. When you get preapproved with multiple lenders, you can choose the offer that is best for you. After you select a few lenders, you will 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 has not yet reviewed your application, then you are not considered to be "preapproved"— so be sure to inquire about the status of your application during the process. Once the lender has all the necessary documents, it typically only takes a few days for the lender to let you know whether or not you are preapproved and how much you have been approved for. But the preapproval process can take longer if you have a past foreclosure, bankruptcy, IRS lien or poor credit.
Our Preferred Lenders:
Martina Wilson
Great Western Home Loans
817-404-9558 Cell
Email: mperkins@gwloans.com
Mark Charles
Supreme Lending
972-841-1209 Cell
Email: Mark.Charles@supremelending.com
Brad Boswell
Town Square Mortgage
972-333-3232 Cell
Email: bboswell@tsmlending.com
Niraj Zaveri
HBLending
972-746-3682 Cell
Email: nzaveri@hblending.com
Ed Andrews
Cardinal Financial
682-429-3443 Cell
Email: ed.andrews@cardinalfinancial.com
Choose A Lender:
Once you make an offer on a house, it is 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 best suitable to your needs and work with it to complete your application.
What's Next?
If you are not able to get preapproved, you can start working on whatever the issues may be. This could mean paying down debt to improve your debt-to-income ratio, saving for a larger down payment, or resolving inaccuracies on your credit reports. Whatever the case, if you go through the preapproval process, you will be made aware of the issue and can address it before you begin your home search. If not, you could be in for an unpleasant surprise when you make an offer on a home. Doing this work upfront can pay off—as getting that mortgage preapproval letter in hand can help you stand out among the rest. However, be reminded that just because you have been preapproved for an amount does not mean you are obligated to borrow the maximum. In many cases, it is probably best if you do not utilitze the maximum. Many mortgage lenders use your gross (before any deductions or taxes) monthly income as a factor in determining how much you qualify for. Your lender generally does not consider your daily living expenses—such as utilities, household goods, healthcare, childcare, transportation expenses, entertainment, and other miscellaneous expenses— in its calculations. It is fully your responsibility to review your own budget to ensure the loan amount is one in which you are comfortable with. Please do not depend on the lender to inform you on what you can comfortably afford. This is all for YOU!