You've been saving up your down payment. You've been spending a lot of time on websites that list houses for sale in your area. When you see an "open house" sign, you think: "Is that one going to be mine?"
Before you start looking at houses and checking off items on your wishlist, let’s talk loans. Until you've been pre-approved for one, you won't know how much you have to spend.
Is pre-qualifying for a loan and being pre-approved the same thing?
No, they are two different processes. Pre-qualification is the first step in the mortgage process. This is where you meet informally with a loan officer to go over your income, and liabilities. Based on the information you provide, you will be able to give you a rough estimate as to how much money you'll be able to borrow. That estimate is not a sure thing, however.
During the formal mortgage pre-approval process whereby you fill out a mortgage application and provide some documents that detail your income and credit. From here, a home loan amount can be determined.
How long does it take?
Since your mortgage pre-approval is not a written loan commitment, it does not take as long as the full loan process. For example, at Wyndham Capital the average time is 5 business days. During this time, the mortgage lender will be verifying your income and credit and making sure that all of the questions they have involving you as a borrower have been answered. Once those questions have been answered, you will receive a pre-approval letter with a loan amount, including an interest rate. You are then free to look at homes at or below the amount of the loan that was provided to you with the pre-approval. It is important to remember though that this letter does not constitute a loan approval.
Good credit matters. Here's why:
It’s one of the most influential parts of the pre-approval process. Most lenders provide lower interest rates to those with a credit score of 740 or higher. Incidentally, while a mortgage application does result in a hard inquiry on your credit, the Consumer Financial Protection Bureau states that you are able to apply for mortgages from more than one lender during a 45-day period and it will only count as one hard inquiry. This allows you to shop around to find the best and compare mortgage interest rates without your credit taking a big hit.
Pre-approval is worth it.
A buyer with pre-approval proves to the seller that he or she is not only interested in buying the house, but also has the means to do it. Some sellers don't negotiate with you unless you have the pre-approval, because they don't want to spend a lot of time talking to someone about buying the house only to have the deal fall through when the buyer is unable to get financing. Bottom line: get yourself pre-approved before you look for your dream house. That way, when you find it, you're ready to go!
At Wyndham Capital Mortgage, we have designed our Priority Purchase program to provide everything you need for pre-approval and beyond during your home-buying process. You are able to get huge competitive advantage for home offers at no cost or obligation.
Take a look.