Mortgage Pre-Approval Explained

Mortgage pre-approvals have been a hot topic for the real estate market these days. Many real estate agents will not even show you a home unless you have a pre-approval. But what is a pre-approval? When should you apply for one? Are they all created equal?

What is a mortgage pre-approval?
This is a key question because even within the mortgage industry itself, lenders may disagree on what constitutes a mortgage pre-approval. To United Home Loans, this means a licensed mortgage originator has taken an application complete with employment, income and asset information. In addition, the lender has obtained your credit report from one of their approved credit reporting vendors. Borrowers cannot assume they have great credit – there are too many cases to count where a client has forgotten about a parking ticket which has gone to collection or a department store credit card where they missed a payment.

When should you obtain a mortgage pre-approval?
Too often, borrowers apply for a mortgage pre-approval after they begin their home search. This is too late. If you have a minor credit issue, a mortgage lender may be able to help you fix it but this takes time. Also, you may be looking in a price point that is either way over or under your budget. We think it is a smart idea to get your pre-approval before you even begin looking at homes on line.

Are all pre-approvals the same?
The simple answer is no. Beware of the lender that issues you a mortgage pre-approval without pulling your credit report and reviewing your income and asset documentation. Here is what you should be asked for when seeking a pre-approval:

• Two most recent pay stubs
• Last two years W2s and federal tax returns
• Two most recent bank and investment statements

If you are not providing these items, you are receiving an incomplete pre-approval and you could definitely be subject to surprises prior to closing, such as a delayed closing or not closing at all.

How long does it take to issue a pre-approval?
Most pre-approvals should be issued within 24 hours of receipt of your credit report and supporting documentation. Sometimes, pre-approvals can be issued the same day but be careful with the pre-approvals that come too fast – the lender may not have done their due diligence.

Is a pre-approval the same as an approval?
No. Even a very thorough pre-approval is not a commitment to lend as it is issued by a mortgage loan originator / loan officer and not an underwriter. Be prepared to provide additional conditions once your loan is fully underwritten and approved by the lender’s underwriting department. Elmhurst loan pre-approval.

Bottom line is this – do your homework when it comes to pre-approvals and do no cut corners. It can definitely cost you in the end. Call United Home Loans directly at 708-531-8388 or contact us below to get started.