A mortgage pre-approval is a quick way to determine how much mortgage you can get when you begin house hunting. The Maine mortgage lender will look at your finances, income, assets, debt, and credit history and determine the maximum amount you qualify for, your estimated monthly payments, and your interest rate. Ideally, you should complete your pre-approval before making an offer on any house. Once you get pre-approved, your interest rate will be locked in for 90-120 days. This means you will get the promised rate even if the interest rates go up during that period.
Benefits of Getting Pre-Approved for a Mortgage
While a pre-approval is not a mortgage guarantee, it has some advantages. Below are reasons why you should consider getting pre-approved before making an offer on any property:
Gives you Confidence
A pre-approval will tell you how much mortgage you can get. Setting a budget and looking for houses within that amount will be easy. You can avoid the disappointment of liking a house and then realizing you cannot afford it.
Fastens the Closing Process
The lender will have most of the information required for the mortgage during the pre-approval process. As a result, your loan process can get accelerated once you make the offer.
A pre-approval tells sellers that you are serious about purchasing the house and have your finances in check. It also tells them there is a high chance that your mortgage will be approved and they can sell the home to you.
Getting Pre-Approved for a Mortgage
Most lenders will run a hard credit check to assess your finances for pre-approval. You must ensure you have a good credit score. These credit checks will have minimal impact on your credit score as various credit inquiries from different lenders within 14-45 days will be considered as just one hard check. Since getting pre-approved is free, you can contact different lenders to see how much loan you can get and for what interest rates. You can also use free tools like the one available on Acadia Lending Group. They are a mortgage company that offers home loans, property evaluations, fast funding options, refinance rates, and cash-out refinance. You need to provide the following documents and information during the pre-approval process:
- Your ID
- Proof of employment and income
- Position and time at your current employer
- Additional assets and income
- Outstanding debt
- Bank statements
- Down payment
- Permission to access your credit report
How Long Does it Take to Get Pre-Approved
Once you provide the documents, you will get a response within 24-48 hours. However, if you have a lot of debt, a history of foreclosures, or a low credit score, the pre-approval can take a few days to several months.
Once you get the formal approval, you can look for a house and make an offer.
What to do if You are Not Pre-Approved?
Sometimes, despite giving all the information required, you may not get pre-approved for a mortgage. Below are a few things to consider, depending on why you got declined:
- Check if lenders approve you for a lower amount
- Check with other lenders
- Save for a larger down payment
- Improve your credit score
- Try to keep a steady job
- Get a co-signer for the mortgage
Difference Between Pre-Approval and Pre-Qualification
Many people confuse pre-approval and pre-qualification and think they are both the same. However, they are both different, and knowing the difference between the two can help you with your home search. To be pre-qualified for a mortgage, you should report your income, assets, and debts to the lender, and the lender will inform you how much mortgage you qualify for without any questions. However, they will not check whether the information you provided is accurate or not. As a result, a pre-qualification will give you a rough estimate of how much mortgage you qualify for. A pre-approval, on the other hand, requires a thorough inquiry into your finances. You need to prove the information you provided is accurate. The lender will verify your credit history, assets, and income to get a fair idea of your financial situation before pre-approval.
Ensuring your finances are in order is vital to get a mortgage. If you are planning to buy a house, it is recommended to get pre-approval immediately. This will not only tell you how much mortgage you qualify for but also give you an idea of where you stand financially and what you can do to improve your situation if you are not in a hurry to invest.