How to Get Pre-Approved for a Mortgage
Getting pre-approved will help you understand how much money you have to spend on your purchase, gives sellers an indication that you can afford their home, and provides you a heads-up on any issues or red flags that could affect your ability to qualify.
More than 15 million people applied for home loans in 2019. In Oklahoma, nearly 88 percent of applicants were approved. But not every situation is the same, so it is important to consult with your community-focused banking institution before starting the pre-approval process. They can provide you with key advice and save you time and effort.
Here is some information to help you navigate the pre-approval process:
What is a mortgage pre-approval?
It's a letter from a financial institution that says it is willing to lend you a certain amount of money to purchase a house. It's a sign that lets everyone involved in the homebuying process know you are serious about your intentions.
What documents are needed for mortgage pre-approval?
One way to stay organized through the process is to create a mortgage pre-approval checklist with all the documents needed for the mortgage pre-approval. Some of the items you need to have at your disposal include:
What about my credit?
As part of your mortgage pre-approval, a credit score from a credit check is a necessary step. Use one of the reputable credit agencies to check your FICO score. A credit score of at least 620 is recommended. Anything over 740 should put you in prime position to receive a lower loan rate. Checking your credit will also give you the opportunity to dispute any inaccuracies in the report before your application.
When should I get started?
You may be wondering when to get pre-approved for a mortgage – the answer is as soon as possible. Exploring pre-approval six months to a year in advance gives you all the necessary time to get your paperwork, credit, and finances in order.
Should I shop around for a mortgage pre-approval?
You want to ensure you get the best rate for your loan, and every lender has different rate options and guidelines. One option to consider is working with an experienced, local credit union. Credit unions are the best financial institution in terms of providing trusted and affordable mortgage services.
How long does mortgage pre-approval take?
There is a wide range of outcomes in determining how long it takes your pre-approval application to go through the system. Your credit, financial history, debt, and other factors can play a role. It can take as little as three days or as long as a couple of months. Having all your bank statements for mortgage approval and other financial documents available can speed up the timeline.
What if I don't get pre-approved?
Failing to get pre-approved is not the end of your home ownership dreams. Take the time to work on problem areas in your application. Take steps to improve your credit score. Keep an eye on your debt-to-income ratio – if that figure is too high, it may scare off lenders. Try to pay down as much debt as possible. You may find that you need to save more to make a larger down payment.
How long does a mortgage preapproval last?
Your pre-approval letter will include key information: the interest rate, loan amount, down payment and other figures. Take the time you need to understand the contract, the fee structure and all other language. The letter should tell you how much time you have with the pre-approval, with the common timeframe ranging anywhere from 30 to 90 days.