Mortgage Pre Approval

Some people, so wrapped with house-buying fever, tend to overlook mortgage pre approval, the most crucial part of the process. Mortgage pre approval describes the actions of examining your finances by a lender, to decide if you can afford to pay for a home. This process is important as you will get a certificate that you can present to sellers as proof that you can afford their property. While not all sellers require a pre approval letter, it certainly gives you an advantage especially where there are many offers for the same house.  And in today's market where properties are listed for sale and go to pending within a matter of days, you need to be prepared to present your strongest offer to the sellers.

Morgage Pre approval process-what to know? 

The process is quite rigorous and you must meet a number of requirements to get this important mortgage document. The requirements may vary depending on the lending institution but in most cases you have to produce:

· Bank statements

· Tax returns

· Proof of debts

· Social security number

· Pay stubs

· Credit report

· Any other relevant financial information.

Lenders or banks need this information to compare it with current market behavior and determine your eligibility to borrow.  It also points buyers to houses within their budget. This shows home sellers that you have a solid plan on how to pay them and while the process might take a couple of weeks, the pre approval letter lets the sellers know that the deal they agree to with you is solid and more likely to proceed smoothly to closing.

Besides increasing seller confidence in buyers, the mortgage preapproval process also helps people to look for the right homes that are within their budget. This saves time and money not to mention easing the home buying process for all parties involved. Those who attempt to buy homes without a pre approval certificate only take longer to close the deal as they need to arrange funds which are not always readily available.

A pre approval is important during the shopping process but that is not a guarantee that you will get approved for a mortgage loan. It is also possible to apply for the loan from a different lender though mortgage approval through the same lender may be a shorter, less involved process.

Mortgage pre approval is much different from prequalification. The latter is only an estimate of the price range of the house you can afford and a highlight of what a lender would loan you.  They do not require the types of documents, as listed above.  They are often just estimate an appropriate house purchase based upon your credit score and the yearly income information you state (without documented proof).  

It is only after deciding on your options that you can proceed to seek the mortgage pre approval from a certified, qualified bank or lending institution.