How to Get Pre-Approved for a Home Loan
Your budget is an important piece in the home-buying puzzle. It will affect the houses that you consider, and it’s hard to know exactly how much you’ll be able to borrow until you consult with a lender – especially in an expensive market like San Diego. Plus, if you’re serious about a place, the seller will often want to know that you’ve got the funds to follow through before you can take any next steps. The answer to this? Getting pre-approved for a home loan.
What is a Home Loan Pre-Approval?
A home loan pre-approval is essentially the meat and potatoes of a mortgage. You consult with a lender, and they take a good, hard look at your finances and determine how much they are willing to lend you and under what conditions. When you apply for a pre-approval, the lender will assess your income, your employment, your deposit, your existing debt, and other specifics of your situation – just like when you apply to actually take out the mortgage.
The lender will also run a “hard” credit check. This is the kind of check that impacts your credit score (unlike a “soft” credit check, which happens when you check your credit yourself, among other things). It’s good to keep this in mind if you’re consulting with multiple lenders – you don’t want too many hard checks.
What About Prequalification?
You might have heard of home loan prequalification too. Although this sounds similar to pre-approval, it’s actually quite different. Pre-approval is much more powerful as it means that a lender has actually taken a fine-tooth comb through your finances. Prequalification is a step before that – where you provide all the information about your finances yourself, but it isn’t assessed or documented by the lender. A pre-approval carries much more weight when it comes to actually look at places in San Diego and speaking with sellers.
How Do I Get Pre-Approved?
Your first port of call is to consult with a lender. They will have a conversation with you unique to your needs, and they’ll let you know what documentation you need to provide. Depending on the kind of loan you’re looking at, these will differ slightly. But you’ll typically need to provide your income and expenses, among other things. Your lender will be able to tell you the specifics – everybody’s situation is different!
Pre-Approval in Advance
Seeking pre-approval 6-12 months before you actually want to buy can be a good idea. Being ready to go with a written pre-approval letter can give you an edge in a hot housing market – like San Diego – and that’s important if you’ve found the place of your dreams and want to lock it down.
It’s also good to know that pre-approval from a lender does not oblige you to follow through and take out a mortgage. When you’re ready to make an offer on a place, you can pin down the lender you want to use – and you’ll probably have a pretty good idea by then of which one you want to go with. UW Funding is a wholesale mortgage broker – and that means we can offer some seriously competitive rates, not to mention tailored service. Reach out to us today for a no-obligation chat on how to get started with the pre-approval process.