Mortgage application is a pretty long process with a variety of similar sounding jargons for you to encounter. If you are a first time home buyer, you might easily get confused, or worse, stressed. But here's one lesson for you to learn today so you can lessen your confusion about the mortgage process. In this article we will discuss the "Pre-Approval Process".
Pre approvals are not the same as the pre qualification stage and it is crucial for a borrower to understand what happens in the pre approval part because being declined in such stage would mean that you'll have a more difficult time in getting the funds for your new home.
First things first, what is a mortgage pre approval?
The pre approval process starts before the actual home buying stage. If you have been pre approved, this would mean that your lender has given you a preliminary loan commitment. It is not necessarily a guarantee that your mortgage application is already done and good, instead, it is a lender statement that implies that if everything goes according to plan, you will ultimately get the loan.
The pre approval process makes the entire loan process quicker and easier, but there is no legal binding in it. So if you are able to find a better mortgage with another lender, you can always opt out of the initial lender that gave you the pre approval.
Pre approval requirements
To get pre approved, you must prove that your finances are stable and you are able to afford a mortgage. You're gonna have to meet with the lender and provide them documents that depict your assets, debts, and income. Your lender would also check your credit and determine your job status to verify your financial report.
Once the lender's criteria are met, a commitment letter will be sent to you telling you the amount of mortgage the lender could give you.
Red flags in the pre approval stage
There are a number of reasons for a person to not receive a mortgage pre approval. But it is most likely that if you have a poor credit score, an unstable income, and a high debt to income ratio, you will be declined. So to avoid being rejected, make sure that your bills are paid on time, and your current job is a stable one.
