Can a Mortgage Pre-approval Function?
Oftentimes, a home buyer with a pre-approved mortgage in her hands has an advantage over one who doesn’t. That’s because typical home sellers tend to look more favorably on purchase offers backed by a pre-approved mortgage. Pre-approval indicates to vendors that the potential buyer is serious and has the financial wherewithal to really finish the purchase. For buyers, acquiring a mortgage pre-approval is usually straightforward–patience and business are normally all that’s required.
Benefits
Becoming pre-approved for a mortgage by a mortgage banker or broker can be a fantastic negotiating tool. For one, a vendor might tend to accept a slightly lower offer if it comes backed by a strong pre-approval. This is particularly important if a rival offer comes from a purchaser who hasn’t yet applied for a mortgage. THe process of acquiring a pre-approval before making a home search also gives a buyer a realistic idea of what she could afford.
Factors
The first step in the process of acquiring a mortgage pre-approval is to submit an application to a lender or a mortgage broker. The purchaser should get an notion of the size of the loan being considered, and the lender or the broker will work with the applicant to determine precisely how much home he can afford. Prospective buyers should always avoid the desire to stretch a considered payment too far, thereby taking on more advance than could readily be afforded.
Application Process
The applicant’s proof of income, work history and credit history are verified in the pre-approval procedure. Even though it might be tempting to inflate or overstate income now, it’s never a fantastic idea. Buyers should be prepared to supply the lender with income tax returns, pay stubs, bank account information and other financial documentation. To decrease the time necessary for obtaining pre-approval, it is highly advisable to have the necessary paperwork lined up beforehand.
Time Frame
The time required from submission of pre-approval program to a conclusion varies from lender to lender. Sometimes, if the lender uses automated systems, it could be the exact same day or even in a hour. If paperwork has to be gathered, analyzed and then submitted, it could be as long as a week or longer. Before the housing bust in late 2008, pre-approvals were occasionally nearly instantaneous, but that’s no longer true.
Caution
Possessing a pre-approval in hand is not a 100 percent guarantee of financing to the part of a lender. Most will conduct a deeper look into your finances once you’ve selected a home to purchase. Don’t make big purchases after getting a pre-approval because doing so can negatively influence your debt-to-income ratio. In the event the debt-to revenue ratio varies too much, the lender may reduce or even withdraw your mortgage pre-approval.