Getting a pre-approval for a mortgage is almost essential these days when buying a house. This gives the home seller a guarantee you have been vetted for a loan. But, there comes a question – how long does it take to get pre-approved for a mortgage. Not many people are patient enough to wait a long time.
But, thankfully, you can get pre-approval just in a single day, depending on the mortgage lender you chose and your qualification. But, most commonly, it takes a few days – sometimes near a week to receive. Moreover, if you undergo an income audit or other types of verifications, it will take more time.
So, if you already have all the necessary paperwork in order, your credit score and financial situation look good, the possibility of getting a pre-approval much faster.
- What is a mortgage pre-approval?
- Why Do You Require For A Mortgage Pre-approval?
- When You Should Go For A Mortgage Pre-approval
- Key Factors of Mortgage Pre-approval
- Mortgage Pre-Approval Process
- Mortgage type and loan terms
- Property Information and Purpose of the Loan
- Borrower Information
- Employment Information
- Monthly Income And Housing expense information
- Details of the Transaction
- The Documents You Will Need
- Will mortgage pre-approval affect my credit score?
- What is the difference between pre-approval and prequalification?
- What to do if you can't get pre-approval?
What is a mortgage pre-approval?
A mortgage pre-approval is a declaration, generally, in the form of a paper or letter, that outlines the amount of money a lender is willing to give you to purchase a property.
The pre-approval signifies that the lender is willing to proceed with the loan provided that the property fits specific requirements and your financial condition does not radically alter. At the same time, your search for a home to buy.
The pre-approval is dependent on your financial profile, which includes your income, bank and investment account balances, and obligations.
The lender does a rigorous credit investigation as part of the pre-approval procedure. The lender uses this information to create a guess about how much you can afford on the house as well as how much loan amount to pre-approve if you qualify.
Why Do You Require For A Mortgage Pre-approval?
Without having a mortgage pre-approval letter (or intend to pay all-cash), it’s pretty hard for a seller to accept your offer in the current house market. On the market, the buyers are numerous who haven’t even talked with a lender before coming to ask for a house.
Moreover, the pre-approved mortgage loans also let you estimate how much house you can buy depending on the amount of money a lender is willing to offer you. With this knowledge, you will be able to eliminate the properties that are out of your price range.
When You Should Go For A Mortgage Pre-approval
As you already guessed, the best time for a mortgage approval would be before you begin shopping for a property. If you don’t go before, there are chances that you liked a property quite, but the amount you will get won’t be able to cover the cost of the property. So, get approval as soon as you feel ready to purchase a property and have all your finances in order.
Before you go for mortgage approval, take your time to research online all the rates and perks you can get from different lenders. In that way, you won’t be at a long end.
How Long Does It Take To Get Pre-approved For A Mortgage
Usually, mortgage pre-approvals are good for ninety days, while some lenders may only allow pre-approvals for 30 or 60 days. If your pre-approval expires, renewing it is as simple as having your lender verify your credit and finances to ensure that nothing has changed significantly since you were pre-approved.
Key Factors of Mortgage Pre-approval
Before pre-approving your loans, lenders will look for several key factors, like:
- Debt-to-income (DTI) ratio.
- Loan-To-Value (LTV) ratio.
- Credit History.
- FICO score.
- Employment History.
Mortgage Pre-Approval Process
Applying for a mortgage may be exhilarating, nerve-wracking, and perplexing all at the same time. Some internet lenders can pre-approve you in as little as a few hours, while others may take several days. The length of time it takes is determined by the lender and the intricacy of your financial situation.
To begin, you’ll need to complete a mortgage application. You’ll provide the lender with your name and address and your Social Security number so that they may check your credit.
Although credit checks for mortgages register as a hard inquiry on your credit reports and may have an influence on your credit score, if you’re shopping various lenders in a short period of time (typically 45 days for current FICO scoring models), the full credit checks count as a single inquiry.
Suppose you are applying for a pre-approval with your spouse or a co-borrower (whose income statement you require for qualification). In that case, both of your applications need to list financial and employment details. Here are the eight main sections of a mortgage application:
Mortgage type and loan terms
The section consists of the loan type you’re asking for, the loan amount, terms, the duration of time you’ll have to pay back the loan, and the interest rate.
Property Information and Purpose of the Loan
The address; the property’s legal description; a year in which it was built; whether the loan is for buying, refinancing, or new housing; and whether the residence will be used as a main, auxiliary, or investment property.
This section provides all the information about you, including name, date of birth, Social Security number, years of school attended, marital status, number of dependents, and address history.
Present and prior employers’ names and contact details (if you’ve been at your current job for less than two years), dates of employment, title, and monthly salary.
Monthly Income And Housing expense information
Over time, bonuses, commissions, net rental income (if you have one), dividends or interest, and all forms of monthly income, including child support or alimony, should be listed in this section.
You’ll also need to include a note of all of your monthly housing costs, such as rent or mortgage fees, homeowners and mortgage insurance, homeowners association dues, and property taxes.
Details of the Transaction
A summary of crucial transaction facts includes:
- The purchase cost
- Loan amount
- Value of improvements/repairs
- Projected closing expenses
- Buyer-paid discounts
- Mortgage insurance
A list of any judgments, liens, bankruptcies, or foreclosures in the past, current litigation, or outstanding bills. You’ll also be asked if you’re a U.S. citizen or permanent resident and if you want to live in the house as your principal residence.
The Documents You Will Need
Following the submission of your mortgage form, you will be required to obtain several papers to verify your information. Your readiness and preparation will make the procedure run more smoothly. Here’s the paper you will need for pre-approval, which you should ready beforehand.
- Two months of bank statements.
- One-month pay stubs.
- W-2 tax returns from the previous two years.
- Schedule K-1 for self-employed borrowers.
- Income tax returns.
- Statement of assets (savings, stocks, bonds, mutual funds, and so on.)
- Driver’s License or U.S. passport.
- Divorce paper
- Gift letter
Will mortgage pre-approval affect my credit score?
Yes, Getting a mortgage pre-approval has an influence on your credit score. This is due to the fact that when lenders examine your credit, they execute a hard inquiry, which might lower your score by a few marks. Thankfully, the impact is minor and diminishes with time: hard queries are removed from your report totally after two years.
If you want to obtain pre-approval from several lenders, try to do it within a 45-day timeframe to prevent causing more damage to your credit than required. Inquiries received during this period will be recorded as single inquiries rather than multiples.
What is the difference between pre-approval and prequalification?
A mortgage prequalification means what you could qualify for based on essential credit and financial data, but it differs from a pre-approval mortgage.
With a prequalification, your lender may simply conduct a soft credit inquiry and frequently relies only on your representation of your financial condition rather than needing verification.
While a prequalification is essential for comparison shopping and evaluating prospective loan conditions, it is not something a seller would evaluate if you make an offer.
Contrary, obtaining a mortgage pre-approval is a more demanding procedure. You’ll give documents to back up your assertions, and the lender will conduct a more thorough assessment of your credit record.
As opposed to a prequalification, a pre-approval is considered evidence that you can afford the house you’re interested in and that the lender will finance your loan.
What to do if you can’t get pre-approval?
If you cannot obtain a pre-approval, talk with the lender about why they denied your request. Suppose it’s a fixable problem, such as an inaccurate credit report causing the lender to deny your application. In that case, you may correct it right away and reapply for pre-approval when it’s fixed.
If you have a low credit score or other financial immediately a non-fixable problem, you need to work on them to improve over time. Raise your credit score by making on-time payments and reducing (or eliminating) your debt burden. Based on your circumstances, this may take some time, but the whole process nevertheless will take a long way.
Because few lenders have stringent qualification standards, another alternative is to make a deal with a more flexible lender. If you have a local bank account or are a credit union member, these institutions may be more willing to provide you with a mortgage pre-approval.