Should I Get Pre-Approved for a Mortgage?

Buying a home is one of the most important financial decisions you will make, and a successful process often begins with mortgage pre-approval. Finding out how much you can borrow before you start looking is a wise move, but what does getting pre-approved for a mortgage mean, why can it give you an advantage, and what does it entail?

Pre-Approval

Getting pre-approved for a mortgage involves a lender doing a preliminary review of your credit and finances to determine how much they are willing to loan you to purchase a home. You will complete a mortgage application and the lender or a loan underwriter will verify the information you provide, perform a credit check, and review things like your employment history and monthly debt payments. If you’re pre-approved, you will receive a pre-approval letter that makes a commitment to provide a loan up to a certain amount and the length of time that approved amount is “good for,” usually 90-120 days.

Reasons to Get Pre-Approved

The pre-approval process will let you know how much you are qualified to borrow and allows you to set your price range in advance of looking for the perfect home. Home buying revolves around how much house you can afford and managing your search for a neighborhood, the type and size of a home, and other wants and needs all depend on knowing what your price range is. The process can also save you time during the offer period as your financial information has already been approved.

Getting Pre-Approved

Getting pre-approved for a mortgage is not as daunting as some are led to believe. In fact, it can be a short and efficient process when working with an experienced lender. You’ll want to check your credit score to make sure it’s at a solid level (620 and above) to proceed. You’ll also need to gather documents to submit to your lender. The types of documents vary by lender but most will want to look at things like your recent pay stubs, tax returns, bank statements, and debt information. Next, you’ll fill out a mortgage application, either online or in person, and submit the associated information required. The lender will then review all of the documents and issue you a pre-approval letter. Again, it’s a good rule of thumb to have your letter in hand before the search begins! 

Advantages of Pre-Approval

In addition to having your financial information reviewed and approved ahead of time, the pre-approval letter will let realtors and sellers know that you’re serious about purchasing a home and that you can secure a mortgage, which can be the difference in a competitive housing market when looking to stand out among potential home buyers. You can act quickly to make an offer when you see a home that meets your needs and negotiate with confidence. Real estate agents and sellers want to work with pre-approved buyers. They don’t want to spend time and energy negotiating a transaction only to have that deal fall through at the last minute for lack of financing. Pre-approval also provides you with an opportunity to think about and decide what you’re comfortable spending on a home as you may qualify to borrow more money than you want to spend.

Pre-Approval Updates

A frequently-asked question about the pre-approval process is what can be done to increase the amount you’re being allowed to borrow in your pre-approval letter. The first step is to talk to your lender and discover any factors that may be working against you. A lender might recommend that you reduce debt, improve your credit score, or offer other guidance.

Putting It All Together

Getting pre-approved for a mortgage is something every prospective homebuyer should do. It can make your homebuying experience easier and more enjoyable while also helping you understand what home might be the best fit for you and your financial goals. Being pre-approved before you step into the housing market not only makes you a better-informed shopper, you’ll also be a more attractive buyer to potential sellers.

At Norway Savings Bank, we understand every homeowner has unique needs and circumstances. With Norway Savings Bank MortgageGO, you can find a mortgage that’s just right for you. Not only will you get competitive rates, you’ll get a supportive dedicated local mortgage professional that will help you every step of the way from pre-approval to closing with technology that makes applying on the go easy. So let us help you find the right mortgage for you! Check out MortgageGO or contact a mortgage loan officer. NSB’s free Mortgage Resources Hub also features a number of helpful articles that can assist you in your process.

This article was written by NSB mortgage lending experts, not generated from artificial intelligence.