Shopping around for a mortgage can be a bit confusing. From prequalification, to preapproval, to underwriting, there’s a lot to understand. Check out this basic primer with information that can help you navigate the process.
How to Get Prequalified for a Mortgage
The first step in securing a loan to buy a house is prequalifying. At this stage, buyers supply their basic financial information such as assets, debts, and income to a bank or lender. Often this information is gathered through an online form or over the phone and isn’t verified. In general, a credit report will not be pulled. However, REX Home Loans provides free credit reports as part of it’s prequalification process.
Based on the information provided, the bank or lender will make a calculation of how much a buyer can afford and may issue a mortgage prequalification letter, which can be presented to the seller. This amount is in no way binding, and the letter does not offer any guarantees that the buyer would be approved for this amount. It can, however, be helpful as a jumping-off point for the age-old home-buying question, “How much can I afford?”
How to Get Preapproved for a Mortgage
Because the prequalification letter carries so little weight, many industry experts recommend that those looking to buy a home move to the preapproval stage before seriously shopping for a home. It’s at the preapproval stage where prospective buyers and lenders become a bit more intimate.
To get preapproved for a mortgage to buy property, potential buyers will need to provide official documents backing up their assets, debts, and income. The lender will verify these documents, do a thorough assessment of financial stability, and run a credit check. The buyer will also fill out an official mortgage application, leaving the property address out if there’s not a specific residence on the table.
A preapproval letter offers a conditional commitment to lend a specific sum to the buyer based on available information. This letter holds more weight with sellers than a prequalification because steps have been taken to verify the buyer’s income, assets, and debts. The preapproval letter allows a buyer to make an offer on a home with a degree of confidence. A preapproval is usually valid for 60 to 90 days.
The Limits of Prequalification and Preapproval
Neither a pre-qualification nor a pre-approval for a loan are a guarantee you will be approved for a mortgage to buy a residence, and neither lock in a rate or secure any specific terms. It’s not until a loan moves into the underwriting stage that either buyer or seller can be confident that a loan has a good chance of being approved.
Since the underwriting stage can be the most important, REX Home Loans has made the step easy to navigate. REX Home Loans provides…
- Quick underwriting approval
- Full underwriter approvals before you shop within 24-48 hours
- No upfront fees
- No obligation
Finding a company that can help you move through the approval, qualification, and underwriting process smoothly is crucial. As always, REX Home Loans is here to help and can answer any questions you may have without any commitment from you.