Owning your own home has long been part of the American dream. It's a goal most of us rightfully aspire to, and one that can often help build wealth. Indeed, 64% of Americans own a home today. If'
Jul 29 2015
Dated: July 30 2015
What Does “Pre-Approval” Mean?
Pre-approval means that the lender is confident that you can make the necessary down payment and that your income is sufficient to cover the mortgage payments. At this stage, only one concern remains. The lender needs to make certain that the property’s value offers sufficient collateral in relation to the loan amount. In other words, the home must be appraised for an amount more than, or equal to, the purchase price.
Why is it Important to Get Pre-Approved?
When you’re ready to make a purchase offer, both your real estate agent and the seller will want to see a pre-approval letter. This proves that you’re likely to be able to make the purchase and, therefore, you can be taken seriously. In a competitive housing market, sellers prefer a pre-approved buyer to those who, for all anyone knows, might be unable to close the deal.
How do I Get Pre-Approved?
Before you roll up your sleeves and look into the details of getting pre-approved, you should first understand all three basic stages of the mortgage application process: pre-qualification, pre-approval, and mortgage commitment.
Getting pre-qualified is an informal process in which you are interviewed by a mortgage professional about your income and expenses. This gives you a general idea of the price range you can afford. It really doesn’t bring you any closer to securing a mortgage.
When you are pre-approved for a mortgage, it means that a lender has looked closely at your credit report, your employment history and your income and has then determined which loan programs you qualify for, the maximum amount that you can borrow, and the interest rates you will be offered. Be aware, however, that your loan representative is not the one who will ultimately approve your loan. That is the underwriter’s role, and these days underwriting is automated. In order for your loan representative to submit your application for pre-approval, you must provide your last two years’ tax returns and W-2s, your most recent pay stubs, bank account statements, and a signed authorization to order your credit report. The automated underwriting system will deliver a pre-approval letter within minutes, and will list any conditions that need to be met for full approval.
Texas Real Estate Consumer Protection Notice