What is a Pre-Approval?

What’s a mortgage pre-approval?

Pre-approval refers to the process of knowing how much money you can borrow from your lender to buy a home. To get pre-approved, your lender will assess your income, credit score, and assets to determine how much mortgage you can be approved for and at what rate.

Difference between Pre-approval and Pre-qualification


Both pre-approval and pre-qualification are used in the mortgage sphere but they are not the same. To get pre-qualified, your lender will not require much information regarding your finances, assets, credit score, and debts. The lender only gives you a loan estimate based on a few financial elements. Therefore, it means that the final mortgage amount and interest might change in the future once the lender reviews your full information.

Mortgage pre-approval is more in-depth compared to mortgage pre-qualification.  Your lender will require you to provide recent financial statements, credit score reports, and other personal details. Once the lender has reviewed your financial muscles, you are given a pre-approval letter so that you can start your home hunting process. 
When you find your dream home, the final mortgage approval is only done once the lender is satisfied with the home appraisal value, condition, and ownership documents.

What are the benefits of mortgage pre-approval?


Why would you want to get a mortgage pre-approval? Although getting pre-approved doesn’t guarantee that you will get a mortgage, there are many benefits that come with getting pre-approved. They include;

• You understand how much you can afford. Once you know the amount of loan you can qualify for, you will start looking for homes that are within your budget. This will save you a lot of time and give you confidence in your home search journey. You will avoid unnecessary heartbreaks of falling in love with a listed home only to realize later that you can’t afford it.
• A pre-approval letter also shows the home seller that you are serious about your home buying bid offer. The seller is certain that your finances are in order and they are likely to give your bid offer the first priority, thus helping you beat your competitors.
• A mortgage pre-approval also fast-tracks the home closing process once you make an offer since the lender has most of your details.

What are the mortgage pre-approval requirements?


Because mortgage pre-approval is more thorough than pre-qualification, your lender will require you to provide more documents for scrutiny. Some of the key details that the lender will ask for include;

• Personal identification documents
• Social security card number
• Credit score report
• Employment verification
• Proof of income
• Income tax returns report
• Assets including bank statements

How long does mortgage pre-approval take?

If you have all the necessary documents ready, the process is short and you can get your mortgage pre-approval letter within a day of visiting your preferred lender. If you have a low credit score or previous foreclosure cases, the process can take a few more days.  Therefore, if you are out of debt and you can raise the required down payment, you should go ahead and get a mortgage pre-approval and actualize your homeownership dream!

If you like to get more information on how to get pre-approved for a loan or would like to speak to one of our preferred mortgage brokers for more information, please contact us at 305-204-3585.

We look forward to helping you with your home loan process.

Jester Nino
Broker Associate
Oscar Teran Group | C5 | EXP Realty