How & Why You Should Get Pre-Approved for a Mortgage
With demand for homes growing in communities along the Columbus’s northern outer belt, prospective buyers will do well to prepare themselves before entering the market. Understanding the difference between being pre-qualified and pre-approved, and why they are important, is a necessary first step. Here’s what you need to know:
What is Pre-Aualification?
Being pre-qualified is a fast and easy process, one that can typically be handled online or over the phone. Basically, it involves a prospective buyer providing a lender with preliminary income, asset, and debt information. The lender will then look over the information and using standard home buying ratios, provide the buyer with a tight estimate on what a buyer will likely qualify for. The buyer can then focus on looking for homes that are within his price range. Pre-qualification will also allow a prospective buyer to begin a dialogue with the lender on the types of mortgages available to him.
What is Pre-Approval?
Being pre-approved is the next step in the process. At this point, the buyer is essentially going through the formal application process. Pre-approval typically involves paying an application fee, providing the lender with the official documentation they will need to conduct a thorough examination of a prospective buyer’s finances, and having the lender conduct a credit check. If all goes well, it will result in the buyer being approved for a specific mortgage amount based on a specific down payment. Most times, you can lock down a preliminary rate for 60 days.
Why You Should Get Pre-Approved
For the buyer, the biggest benefit of being pre-approved is knowing exactly how much house you’ll be able to buy. For the seller, it provides the assurance that an offer is serious and less likely to fall through somewhere down the road. For both the buyer and the seller, having done most of the work up front will streamline the process going forward.
Completing a mortgage application requires that the home buyer provide, at a minimum, recent addresses and any associated mortgage documents, date of birth, social security number, work history, W-2 forms, and tax returns for the two most recent two years. Pay stubs, bank statements and information on investment accounts for the most recent months will also need to be provided.
Overcoming a Rejection
If you do not qualify for a mortgage at this time, it is likely due to the fact that your credit score isn’t high enough, your debt-to-income ratio is too high, or your down payment is too low. Correcting errors on your credit report, reducing debt, and increasing your down payment can help overcome a rejection.
Buying a Home in New Albany, OH
Doing the work necessary to gain approval for a mortgage early in the process of shopping for a home can prevent headaches and disappointment down the road. Contact our preferred lender and see how you can get started on the right track for buying a home around New Albany.