No one wants to be in line at the grocery store and realize that they have insufficient funds in their account to cover the cost of their groceries. They also don’t want to find their dream home and realize they aren’t approved for the necessary loan amount. Thankfully, getting pre-approved for your mortgage can help prevent any mishaps when purchasing your home. This week for homeownership month 2022, we’re going to explain why getting pre-approved for a mortgage is an essential part of the mortgage process and provide some mortgage pre-approval tips to streamline the process.
What is Preapproval?
Obtaining a pre-approval letter is the first step toward purchasing your home. A mortgage pre-approval allows your lender to determine how much you can afford to borrow based on factors like your credit report, assets, debt, and income.
Obtaining a pre-approval isn’t a commitment to purchase a specific house. Rather, it provides the framework to begin house hunting within a range that fits into your mortgage program. Typically, your mortgage rate isn’t locked in until you find the property you wish to purchase. However, there are mortgage programs like the Lock N’ Shop program that allow you to lock in a rate while you house hunt.
Learn more about the Lock N’ Shop Program.
The Framework for Success
Your preapproval provides a framework for success when house hunting. It allows you to search for homes within your price range so that when you find your dream home, you’re a step closer to purchasing it.
Obtaining a mortgage pre-approval is a fundamental part of the mortgage process that provides other benefits such as:
- Letting the seller know that you’re serious about purchasing the home.
- Allowing stronger negotiation for your home, since you have a price range to negotiate within.
- Often putting you on the fast track to closing on your home since your lender has many of the financial documents needed to write your loan.
4 Mortgage Pre-approval Tips to Set You Up for Success
Once you decide to get a mortgage pre-approval, there are some things you can do to streamline the process. Some preapproval tips to get you started include:
- Pay debt down. If possible, pay debt down where you can. Lowering your debt-to-income ratio can help you qualify for different mortgage programs and help you get the best mortgage rate for your financial situation.
- Be mindful of your credit. Lenders and mortgage programs have specific standards for credit scores based on each mortgage program. Understanding your credit score and learning what causes low marks on your report can allow you to pay those debts off first.
- Gather financial documents. When generating a pre-approval, your mortgage lender typically needs financial documents to determine what you can be approved for. Preparing documents like paystubs, W2s, and tax returns can help expedite the pre-approval process.
- Don’t make any big purchases. When starting the mortgage process, it’s a good idea to stay away from taking out loans on other big purchases. Additional loans can affect your credit score and potentially lower the amount you’re pre-approved for.
Implementing Mortgage Pre-approval Tips Can Give You Peace of Mind
While purchasing a home is a huge accomplishment, it doesn’t have to be a stressful one. Applying the tips above and obtaining a pre-approval can help streamline the process. Your mortgage lender can help you navigate the process from pre-approval and on to help make your dream a reality this homeownership month.
Julie Krumholz Named Hour Detroit’s 2022 Real Estate All Star
Julie Krumholz has been selected as one of Hour Detroit magazine’s 2022 Real Estate All Stars! The list will appear in the June 2022 issue of Hour Detroit, the summer issue of Detroit Design and online at HourDetroit.com.
Julie has over 35 years of mortgage experience from working in processing, closing, and loan origination, underwriting, QC auditing and has even co-owned a mortgage brokerage firm. She applies her knowledge to help first-time homebuyers and seasoned homebuyers alike.
