Buying a house is certainly a stressful process. A prosperous homeowner usually worries about dozens of different things and one of them is a mortgage. Today we are going to talk about how long does a mortgage pre approval take, what it is, why you should do it, and a lot of other things.
Long story short, you need a mortgage pre-approval to see how much money you can spend on your future home. But it is only one of its advantages, we will talk about them more later in the article, as well as we will list popular mistakes and give you useful tips.
What a Mortgage Pre-Approval Is or 3 Steps of the Pre-Approval Process
Mortgage pre-approval is more or fewer checks of your credit history. The whole thing goes in the following way: you let the bank check your credit history and it shows them what exactly they can offer for you.
This may sound quite easy, but the process of mortgage pre-approval has some peculiarities which are very important to know beforehand. For example, you have to understand that there are three different stages of pre-approval.
The first stage is an initial credit check. This stage determines if you have problems with your credit history or not. If you have issues, the bank will refuse to offer you something for sure because this would be only adding fuel to the fire.
If everything turns out alright in this phase, then the next step will be credit appraisal which is more detailed and thorough than the initial check. Still, it doesn’t mean that it isn’t easy to pass tests in this phase because there are questions about your savings habits and other things like this which need to be verified before accepting your application.
The last step will be the final decision. It is often called the soft decision for this reason. It means that you have passed all stages of pre-approval but the bank still has doubts about your credit history, so they are being extra careful with their choice of you.
- Initial check
- Credit appraisal
- Final decision
Why You Should Get a Mortgage Pre-Approval or Pre-Approval Advantages
There are several reasons why you should get a mortgage pre-approval from the bank before purchasing a house. For example, you need to know what is going to happen in case of your bankruptcy or if you were injured in an accident. It may sound unlikely, but the first stage of the pre-approval determines your credit history, which can be impaired by one or more of these situations.
Even more important is that it allows you to see concretely how much money you can spend on your future home without adding unnecessary costs to the deal. You can also use information about the loan amount to bargain with the seller so you could get better prices for your future house.
You can also use mortgage pre-approval to find out what kind of paperwork you need to complete this process. After all, you don’t want to be left on the street if something goes wrong with your application.
Mistakes You Should Avoid in Mortgage Pre-Approval
We all know that “to err is human”, however, we are here to help you, so we will list the most popular mistakes for you. Try to learn from them!
1. Set aside major purchases
Yes, we can understand that you absolutely need that large TV in your house. However, you should take some time before buying it because this can affect your financial situation, leading to a decrease in your debt service ratio and mortgage rejection later. So, your financial situation shouldn’t change from pre-approval to loan finalization.
2. Do not make new credit cards
Your debt level and available credit are both factors in mortgage approval, so it is better for you to not mess with them if you want to be approved completely. It is like the situation in the restaurant, you already ate a huge hamburger and then just ordered another one. The question hangs heavy in the air, can you eat the second burger? The bank thinks the same.
3. Do not change or quit jobs
Spring is in your heart, “new home — new possibilities”! BUT, predictable income is very important to most mortgage applications. If you want to finally have your own house it is better to wait for changes in your employment because they can negatively affect the bank’s decision on you.
4. More is not necessarily better
Finally, it is better for you to not be pre-approved over your budget. We know that this idea is tempting, but you need to keep it together. You should know that the mortgage you’re pre-approved for could be more than what you can actually afford. You could have been pre-approved for much more and been tempted to use it to buy a more expensive home, even if you couldn’t afford it because it is way more profitable for the bank. So you need to stay reasonable, no matter what happens.
Useful Mortgage Pre-Approval Tips
And now let’s move to the more pleasant section, such as mortgage pre-approval tips and answering the question of how long does a mortgage pre approval take.
1. Assemble your documentation beforehand
It may sound obvious, but some people can really forget about that. It is very important to prepare all necessary documents in the first place. These are:
- Proof of employment, assets and income
- Information about your debt
There are no additional requirements but if you don’t have all these on hand, it will be harder to borrow money from the bank.
2. And now you can apply for pre-approval
As it was noticed before, pre-approval is quite a useful and important step while buying a house. So, when you prepare all the necessary documentation you can apply for pre-approval without hesitation! You may ask, how long does a mortgage pre approval take. Well, it depends, it can take from an hour to several weeks.
3. Always be online
It is very important not to plan any vacations during the time of buying a house. You should be available any moment because your mortgage broker can find a nice offer for you and tell you how long does a mortgage pre approval takes, or you can call him if something changes in your finances.
4. Increase your pre-approval rate
Last but not least, do not agree to the first offer you see. It may be really great, but you should wait, a lot of better offers wait for you ahead. Your mortgage broker will help you in finding the best offer for you so you will save money during your monthly payments and this will also increase your mortgage rate. After you will be preapproved you will have from 90 to 120 days during which your offered rate will be held for you. This is when you should start house hunting!
Mortgage pre-approval is a useful stage in the process of buying a house since it allows you to minimize risks by estimating how much money you need from a bank and if you can afford the monthly payment or not.
It does not guarantee you will get a loan but it reduces the risk of mortgage rejection to almost zero. That is why we advise you to be very careful when applying for your first mortgage. You can save money and get a better rate. The most important thing is that being pre-approved means that you have all the chances to finally have your own house!