Be Ready With Your Mortgage Pre-Approval
If You Want an Advantage When It's Time to Buy
A scenario I'm all too familiar with played out once again over this last weekend ...A phone call came in from a prospective home buyer. They wanted to get pre-approved for a mortgage. Their realtor had advised them that they needed a Pre-Approval Letter in order to submit an offer on a home they had viewed and fallen in love with.
Time was of the essence, as they hoped to submit their offer to the home's Seller immediately. Interest in the home was high and they were sure there would be multiple offers made.
This was my first conversation with this home buyer. They'd been referred. But from very first contact, we were in "crisis mode". We shot from zero to 60 mph instantly. And right out of the gate, these home buyers were experiencing stress regarding their mortgage financing.
Now I completely understand that potential buyers might start a home search and view properties casually when they first being the home buying process. It's their way of testing the real estate waters, so to speak.
And I also understand that while casually viewing homes, a portion of those prospective buyers come upon the "perfect home" that triggers their need for more serious financing answers and actions.
But in the majority of cases, that is not and should not be the case ...
As a result, the process of seeking and securing mortgage financing should be more measured and methodical. It should be prepared for, planned for, and executed in stages. When conducted in this proactive manner, the mortgage process is far less stressful for borrowers and they avoid much of the stress and panic that my new clients felt so keenly over the weekend.
This more measured and methodical approach is a distinct advantage to lenders too. It allows them ample time and opportunity to ask their prospective borrowers more questions and gain more detailed information ... an advantage that should not or cannot be overlooked or minimized.
When given time, a lender can perform a more thorough examination of financial information, credit reports, subject property (and more). And that, in turn, means more dependable information provided by the loan officer to their clients and agents ... and fewer issues arising moving forward.
It's a fallacy that, in the current mortgage process, Pre-Approvals and Pre-Qualifications are a simple thing to provide. If performed properly and reliably, they are not. There is much info to gather and consider. Information, preparation, and execution all greatly matter ... as does your choice of Loan Officer.
Because of this, potential home buyers (and those refinancing), should allow ample time for loan officers to gain all the detailed information needed for a Pre-Approval Letter. Time allows a loan officer ample opportunity to conduct an in-depth analyzation and opportunity to seek further info from their client if needed. The results are far better for all involved.
As an example ...
A first-time home buyer was referred to me by his father, an acquaintance of mine. This young buyer reached out to me initially via email. He then followed that exchange of information up with a phone call.
This young buyer related to me that he'd previously communicated online with 2 other lenders and had even sought Pre-Approvals from them. I liked that he had acted proactively, but unfortunately, neither lender had reached out to him in return. They had not provided him the information he gained during our phone conversation together.
Some of that important information included:
- Detailed information about financing a Condo
- Substantial info regarding the Transfer Tax Fee he would incur because of his Condo city/location preference
- A breakdown of his prospective Closing Costs
- How his Interest Rate would be affected by his Credit Scores, Down Payment percentage, and Debt-to-Income Ratio
- The cost of his (required) Private Mortgage Insurance
- That a Seller could be asked to contribute/offset some or all of his Closing Costs
- That his search for a condo (and subsequent information regarding the property) could be better served by a Realtor
- A referral to a local experienced Realtor
- More ...
Most importantly during this conversation: I was able to obtain his financial information and was then able to pull his Credit Report. This resulted in my being able to issue a Pre-Approval Letter quickly and easily on the day he wished to make an offer. We sailed right through because his proactive actions paved the way for a fluid Pre-Approval and successful, less stressful mortgage process.
Bottom line:Don't go home shopping before you get Pre-Approved for your financing.The stakes are too high to NOT take proactive action when you're hoping to buy and finance a home.
The present real estate housing market does not allow for hesitation or poor preparation.Time, money, and a home you love can be lost if you wait too long.
Commit yourself and the time needed to a proper mortgage search ... starting with a thorough search for an experienced knowledgeable loan officer. Start that search early. Talk to that loan officer months ahead of when you hope to buy or even start a preliminary search for a home. The more time you allow, the better.
If buying or refinancing a home or investment property in the Chicagoland - IL - WI area, I'd love to hear from you.
* Are you hoping to buy or refinance a home or investment property in New Lenox, Will County, or elsewhere in the Chicagoland, IL/Wisconsin area?
Contact Me! I'll put my 40+ years of mortgage experience and expertise to work answering your questions and fulfilling your financing needs.
I'm easily found at:
Gene Mundt
Mortgage Originator - NMLS #217987 - IL Lic. #031.0006220 - WI Licensed
American Portfolio Mortgage Corp.
NMLS #175656
Direct: 815.524.2280
Cell/Text: 708.921.6331
eFax: 815.524.2281
Gene Mundt, Mortgage Originator,an Originator with 40+ years of mortgage experience, will offer you exemplary mortgage service and advice when seeking: Conventional, FHA, VA, Jumbo, USDA, and Portfolio Loans in Chicago and the greater Chicagoland region, including: The Lincoln-Way Area, Will County, (New Lenox, Frankfort, Mokena, Manhattan, Joliet, Shorewood, Crest Hill, Plainfield, Bolingbrook, Romeoville, Naperville, etc.), DuPage County, the City of Chicago, Cook County, and elsewhere within IL & WI.
Referrals are Greatly Welcomed & Appreciated!
FAQs
Preapproval can be extremely valuable when it comes time to make an offer on a house, especially in a competitive market where you might want to stand out among other potential buyers. Again, a seller will be more likely to consider you a serious buyer because you have had your finances and creditworthiness verified.
How soon before buying a house should you get pre-approved? ›
Starting early on your search gives you enough time to explore different neighborhoods, view multiple properties, and find the right home for you. The best time to get pre-approved for a mortgage is between 1 and 4 months before buying a home.
Is there any downside to getting pre-approved for a mortgage? ›
Although a preapproval may affect your credit score, it plays an important step in the home buying process and is recommended to have. The good news is that this ding on your credit score is only temporary.
What is an advantage of preapproval for a buyer? ›
Getting pre-approved for your home loan before you begin house hunting can: Move you one step closer to home ownership. Learn the home loan amount you may be able to afford. Provide confidence in your ability to obtain financing.
Why should you prequalify for a mortgage before shopping for a home? ›
Here are the benefits of being a pre-approved buyer
You know the details of your financing before you pick out a house. You not only know how much house you can afford, you also know the terms of your loan. You know how much you can spend and won't waste time looking at homes you can't afford.
How long between pre-approval and closing? ›
If you are pre-approved or credit pre-approved for a loan before you start the home shopping process, your mortgage could close in as little as two to three weeks after your offer is accepted on a home.
Does pre-approval include down payment? ›
The pre-approval process requires copies of your pay stubs as proof of income, a financial background check, bank statements, down payment amount, desired mortgage amount, tax information, and so on.
Do pre approvals hurt your credit score? ›
No—they may involve a soft inquiry, which won't affect your credit score. If you are pre-approved for a specific card you will receive an offer. The offer itself doesn't generate a hard inquiry, so don't worry—just because you have the offer doesn't mean you've hurt your score.
Do home pre-approvals hurt your credit? ›
There's one catch involved in getting a mortgage preapproval: It can lower your credit score. The reason is that a preapproval requires a hard credit pull, which shows up as a hard credit inquiry on credit reports from Experian, TransUnion and Equifax. The decrease is only temporary, however.
Is it better to be prequalified or preapproved? ›
While prequalification is a good first step, it typically won't carry as much weight as a preapproval because a lender hasn't verified your information. Going beyond prequalification and getting preapproved by a loan officer is a critical step that shows you're serious about buying a home.
Usually, the preapproval shows the maximum purchase price/loan amount the lender will preapprove you for, and comes with an expiration date. If you try to make an offer on a home for an amount higher than you're preapproved for, sellers are likely to ignore the offer because you won't get approved for the loan.
What four things does mortgage pre-approval do for you? ›
A mortgage preapproval only means a loan officer has looked at your finances—your income, debt, assets and credit history—and determined how much money you can borrow, how much you could pay per month, and what your interest rate will be.
Does preapproval mean you get the loan? ›
Both pre-qualified and pre-approved mean that a lender has reviewed your financial situation and determined that you meet at least some of their requirements to be approved for a loan. Getting a pre-qualification or pre-approval letter is generally not a guarantee that you will receive a loan from the lender.
How many pre-approvals should I get? ›
How many mortgage preapprovals should I get? While it's a good idea to rate-shop with at least three lenders, you only need one preapproval letter to make an offer on a home.
What credit score is needed for a mortgage? ›
Credit score and mortgages
If lenders review all the information and determine that you are likely to make your mortgage payments in full and on time, you may be able to get better loan terms. The minimum credit score needed for most mortgages is typically around 620.
What happens after pre-approval? ›
What happens after I'm granted a pre-approval? Once you're armed with approval in principle, you can go house-hunting with a clear and realistic idea of your overall budget. And when you've found the right property, you can start the formal approval process for your home loan.
Can you get preapproved too early? ›
There are nearly no adverse effects from getting pre-approved too early. The only slight risk is that your credit score drops – less than five points, says MyFico. Your credit score could drop if your lender pulls a new report every 90 days, so ask your lender not to pull credit again until you've found a house.
How long is pre-approval good for? ›
Most lenders will provide a mortgage preapproval letter that expires within 60 to 90 days. Not only can interest rates change during the preapproval window, but so can your financial situation. Either can affect your maximum borrowing potential, which is why lenders don't want to take on the risk beyond 90 days.
How often do pre-approvals fall through? ›
What are my chances of getting denied after preapproval?
| Loan program and purpose | Closing rate |
|---|
| Conventional purchase | 80% |
| FHA refinance | 65% |
| FHA purchase | 78% |
| VA refinance | 72% |
2 more rowsDoes getting pre-approved hurt your credit score? Getting pre-approved does not hurt your credit score.
