When you’re looking for a house, it helps to have an idea of what you can spend. One way to find that out is to get a mortgage preapproval. A preapproval letter is a document from a mortgage lender telling you how much you can afford based on your credit report, income and assets.
Your preapproval is also the first step in your relationship with your lender. If you get preapproved before finding a home, you won’t have to start the whole application process once you’ve signed the purchase agreement. Many sellers will not accept a contract on a home without a preapproval letter.
The Parts of a Mortgage Preapproval
The most basic part to a mortgage preapproval is a analysis of your financial situation. To get preapproved, you need proof of your income, such as W-2s and tax returns. You will also need proof of assets, such as bank statements.
This will be the first time that the lender will need to have your credit pulled. Pulling your credit allows your mortgage lender to get an idea of the monthly payments you have to make on your debts. Your credit report also tells your lender how you’ve handled paying debts in the past, letting them know how much of a risk you are as a borrower.
In the end, you’ll get a dollar amount that represents how much you can afford to spend on a home.
It’s important to note that a preapproval letter is not a prequalified letter. When you get prequalified, your lender doesn’t pull your credit or verify any of your information. This might cause problems if you make an offer on a house but don’t get approved for that amount.
It’s far better to know for certain how much you can afford upfront, and a preapproval can help you do that.
Using Your Preapproval
Once you have your preapproval letter in hand, you can go shopping for a house with confidence knowing that you can make a rock-solid offer.
Keep in mind, however, that preapprovals do have a time limit. At a certain point, the lender has to re-check your credit report and re-verify your income and assets. This time limit varies from lender to lender.
It is also very important that once you are preapproved, you do not borrow any additional money from any lender. This can lead to difficulties, in the mortgage process, to the point that in some cases you mortgage loan will fall through.
A new home is one of the biggest purchases you will have in your life. Take time to make sure that you have all of your paperwork ready to send in to the lender and make sure you do not do anything that will change your credit status and cause you to loose your new home.
Author:Andrea Ackerman Phone: 334-717-6689 Dated: February 21st 2017 Views: 148 About Andrea: ...
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