Obtaining preapproval for a mortgage is the first step toward becoming a homeowner. It establishes your home purchasing budget and gives realtors confidence that you’re a serious buyer. Plus, it may give you an edge over other buyers who haven’t taken this step.
Before you attempt to make an offer on a home or even start house hunting, it’s critical to obtain preapproval.
In this article, we will discuss the three crucial steps in the mortgage preapproval process. However, before getting into those details, it’s essential to understand what mortgage preapproval is.
Mortgage Preapproval – A Brief Introduction
Mortgage preapproval is when a lender provides you with a letter stating how much money they’re willing to lend you to buy a home. This letter is based on a review of your financial history, including your income, debts, and credit score.
Mortgage preapproval is different from pre-qualification. Pre-qualification is when you provide a lender with an estimate of your financial history without providing any documentation.
The preapproval process is in-depth, giving you a more accurate estimate of how much money you’ll be able to borrow.
The Process of Getting Preapproved for a Mortgage
The procedure of obtaining preapproval varies from lender to lender. However, it generally includes completing a loan application, a credit check, and reviewing your employment history.
You have an option of completing the whole process online, or you can do it in person at the lender’s branch.
1. Complete a Home Loan Application:
A home loan application, also known as Form 1003, is a standard mortgage application that lenders use when you’re applying for a loan. It requires you to share your personal information, such as your name, birthdate, social security number, and current address.
Upon completion, the lender will pull a three-bureau credit report called a tri-merge. This document displays your credit scores and history from major credit agencies such as TransUnion.
You can choose the lender you want to work with. Since preapprovals are non-binding, you’re not obligated to move forward with the respective lender. You may even receive preapproval from several lenders to get the best offer.
2. Document Your Assets and Income:
Documentation is the distinguishing factor between a preapproval and a pre-qualification. To get preapproved, you’ll need to provide your lender with extensive documentation about your income, employment history, current assets, debts, and more.
Having the following documents ready will help the preapproval process go smoothly:
- Pay stubs for the last thirty days
- W-2s for the past two years
- Most recent bank statements
- Identification documents like a driver’s license
Your lender will verify this information with your employer and bank to ensure that everything checks out.
3. Allow Your Lender to Complete the Process:
Your role in the preapproval process is mainly complete once you’ve submitted all the required documentation. From there, your lender will take over the underwriting process. It is the last step in the preapproval process and can be instantly completed owing to the use of AUS.
AUS is an automated underwriting system that accesses the information from your loan application and compares it to data from many different sources. It then uses this information to generate a risk assessment for your mortgage loan.
Once AUS has provided its decision, your lender will be able to give you a final preapproval letter.
Generally, mortgage preapprovals may cost between $300 and $500. But, at OSO Creek Mortgage, we don’t charge a dime for our mortgage preapprovals.
We are mortgage brokers in Lake Forest, CA, and our focus is on providing our clients with the best possible mortgage experience.
Apply now and let us help you get preapproved for your mortgage loan.