Mortgage pre approval is the process of getting finances assessed in preparation for mortgage approval. It’s considered as the first step in getting a mortgage suitable for buyers. However, many people don’t think its important part of mortgage application process.
Reason Behind the Thinking
The number of people who failed to file for pre-approval is the main reason behind this thinking. A report claimed that many people skip this part of mortgage processing, but still get their loan approved. It means it doesn’t have as much bearing on mortgage application process. However, pre-approval still has its merits for a number of reasons.
Differentiating Pre-approval from Pre-qualification
The process between pre-approval and pre-qualification is similar. However, pre-qualification is less stricter than pre-approval. In pre-qualification, lenders will only consider basic financial information that makes you qualified to get a loan. Based on your accounts, a lender may conclude that youmay qualify to get a loan.
Pre-approval, on the other hand, is stricter because lenders will further investigate your financial records and verify your financial approval. For them, pre-approval means you may be pre-approved of the loan you’re planning to apply for. Lenders would use the same documents used for actual mortgage application then assess them using the same procedure.
What can It Do for Buyers?
Pre-approval has its advantages for clients. This allows clients to get property offers coming from different brokers and sellers. Sellers know that a pre-approved person is capable of getting a house. They simply need formalization for mortgage and they can complete the process with ease.
Another advantage is it increases the chances of getting approved for loans. Initial analysis already showed that a pre-approved individual is capable of paying their loans, which means good business for lenders.
Required Documents and Procedures
Mortgage lenders will look for several documents for pre-approval. The first types of documents are personal information where prospect borrowers must show government issued identifications like social security number, driver’s license, marital status, and verified contact information.
The next set of documents to present are financial accounts. Bank statements and other investment accounts must be presented to gauge a person’s financial profile. Aside from bank statements, other related documents that show general financial standing like assets, IRAs, and retirement incentives must be submitted to further study a person’s financial status.
Proof of capability to pay loans is the next types of documents. Proof includes employment information. A person with stable work and has been working with their employers for a long time will show lenders if he can be pre-approved for a mortgage or not.
What People Must Remember in Getting Pre-approved
While pre-approval increases the chances of loan approval, it’s not a guarantee that a person will be approved of a loan. Lenders may find a person capable of paying for loans, but not for a specific amount needed for their property purchase.
Pre-approval has its merits and is important for people looking for the best mortgage rates. Filing for mortgage pre approval is now easy through different lenders serving a person’s locale. Information about this process is also available on their websites.