How to Get Pre-Approved
HOME BUYER'S GUIDE
A Mortgage Pre-Approval Shows What You Can Afford
It can be tempting to start searching for a new home by browsing listings and scoping out potential neighborhoods. But before you fall in love with a house, you should get pre-approved first. A mortgage pre-approval will help you estimate your monthly payment and understand what you can afford.
What's a pre-approval?
A pre-approval is a lender deciding that, based on the financial information you provide, you’re a good candidate for a mortgage. In the pre-approval process, you usually get an estimate of your loan amount, interest rate, and what your monthly payment could be. This process can vary from lender to lender, and some lenders will call this a "pre-approval" or a "pre-qualification."
Why Getting Pre-Approved Is Important
Getting pre-approved first has a few advantages:
Keep in mind a pre-approval is just the start of getting a mortgage. Once you find a house and make an offer, the house will need to pass inspections and be appraised by a third party. Your pre-approval amount could also change if your financial situation changes.
What Lenders Review
Mortgage lenders typically look at three criteria when deciding on how much you can borrow: your assets, your income, and your credit.
Assets are items you own that could be turned into cash should the need arise. They include things like checking and savings accounts, stocks, real estate, personal property, and more. Lenders review your assets to make sure you have some money set aside to make your mortgage payments after closing.
Lenders review your income to ensure you can afford a monthly mortgage payment. They'll also check your debt-to-income (DTI) ratio to make sure that the amount of debt you have doesn't offset your income too much. Typically, a mortgage company will want to see you have a DTI below 50%.
Having good credit can help you qualify for a better interest rate because you've shown you're a responsible borrower. Some mortgage lenders have minimum FICO® score requirements.
Will getting pre-approved affect my credit score?
Getting pre-approved for a mortgage involves pulling your credit report, and this can lower your score by a few points. However, if multiple lenders check your credit over a short period of time, the credit bureaus will count these inquiries as a single credit pull, and your score will only be lowered once.
Steps to Getting a Pre-Approval
Every mortgage lender has its own process for getting pre-approved. At Arcstone Financial, we use have a dedicated team that handles your pre-approvals quickly and efficiently.
The easiest way to get a Pre-qualified Approval is online through Arcstone Financial. After you create an account, you'll:
Answer a few questions about your income and assets.
Give us permission to pull your credit report.
If you're pre-approved, you can download or print a Pre-qualified Approval Letter to share with your real estate agent to start house hunting.
With a TBD, you can strengthen your bargaining position before you make an offer. Verifying your finances will help you make a stronger offer because it shows the seller you are able to buy the home. All your income and assets are reviewed by an Underwriter, and your TBD approval allows you to show with more confidence knowing the only things from finding your home are an appraisal and an accepted offer!
How long is a pre-approval letter good for?
Pre-approval letters generally expire after 90 days, though that can vary based on your type of loan. If you haven't made an offer within 90 days of getting an approval letter, you should renew your approval before making an offer on a house.
How to Choose Your Mortgage Company
To get the mortgage that's right for you, make sure you ask:
What are your rates and fees?
How much time, on average, do you take to close a purchase home loan?
What is your client satisfaction rating?
Will you service my loan after we close, or will you sell my loan to another company?
What's your availability if I have questions or need to get in touch?
Can we do this online, or will I need a fax machine and stamps?