What Does It Mean to Get Preapproval for a Mortgage Loan?

How to finance your property investments?

Preapproval  and the reality is for most residential real estate investments you can borrow to buy an investment property...

People interested in buying a house can often approach a lender, which check their credit history and verify their income, and can provide assurances they would be able to get a loan up to a certain amount.

This pre-approval can then help a buyer find a home, which is within their loan amount range.

Buyers can ask for a letter of preapproval from the lender, and when house hunting or shopping for a home get a possible advantage over others because they can show the seller they are more likely to be able to buy the house.

What Does It Mean to Get Preapproval for a Mortgage Loan?
What Does It Mean to Get Preapproval for a Mortgage Loan?

Often real estate agents prefer to work with a buyer which has a pre-approval as it demonstrates they are well-qualified to receive financing and are serious about buying a home.

A pre-approval is based on documentation the borrower supplies at the time of application, and any actual eligibility to receive the pre approved loan depends on terms and conditions of the pre approval and ability to secure the loan before the pre approval expires

Why get preapproval for a loan? Because you’ll be in a better position to negotiate, and understand the whole process involved before pulling the trigger.

Before starting the preapproval process, get familiar with your credit and how credit works. Review your credit reports to be sure there are no errors.

Mistakes can hold up the process and prevent you from getting the loan you deserve. Mistakes can also be fixed, but the process can take a while.

Choose a Lender: Shop around for a good lender. Check with banks, credit unions, and online lenders to see what they offer. They all cater to different borrowers, so figure out which one is the best fit for you.

A local credit union is often a good starting point, yet credit unions do not always offer the best rates.

Find out what each lender’s interest rate and fee structure would be. If you’d like to have the option of paying off the loan early (who wouldn’t?) then investigate prepayment penalties.

Finally, make sure it’ll be convenient and affordable to pay the way you want to pay — by paper check, bill pay, or electronic transfer.

Get Prepared: When you get preapproved, your choice of lender needs relevant information from you. Get information ahead of time so your application can get through the underwriting process.

Lenders want to know about your finances. You’ll need to document how much you earn (you need income to repay the loan), and it may help to show you have other assets available to you (such as cash in bank accounts).

Your lender may ask for the following items, and more:

  • Pay stubs
  • Bas statements (PAYG) instalments
  • Tax returns
  • Bank account statements
  • Other account statements

You may not need to provide copies of these documents in order to get pre-approval, and you would at least find out where they are and get familiar with them because it’s important that anything you say on an application is accurate.

You may also have to provide information about the thing you’re buying. If it’s a house, is it a family residence, or is it a n apartment, townhouse or unit in a building with 50 units?

The more detail you…the better because your lender’s offer may change depending on what you want to buy.

Apply for the Loan: Once you’ve picked a lender and prepared yourself, it’s time to apply. There’s only one way to find out how much you can get so go ahead and fill out an application to wait for an answer.

An offer may come quickly, or it may take a while. Lenders do a quick once-over when you get preapproved, so you should have an answer within one day.

Be aware some lenders claim to preapprove you without really looking at your finances. If they don’t run your credit or ask about your income, it’s not a good sign.

You want a preapproval that actually means something, and lenders can only make a realistic offer if they know something about you. If you get a fake or not a genuine preapproval, you may later find out you can’t really borrow as much as you hoped.

Preapproval

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