Getting Pre-approved For a Mortgage

Allison Beatty
LoanBiz Columnist

Article Rating , 4 out of 5 based on 1 votes

Before shopping for a home, take some time to consider your financial situation. How much home can you really afford? Which neighborhoods should you shop in? The best way to be prepared is by asking a mortgage lender for a mortgage pre-approval.

Ins and Outs of Mortgage Loan Pre-approval

A mortgage loan pre-approval is important because it means that a loan officer has done a thorough review of your:
  • Credit report and history
  • Income
  • Employment history
  • Debt level
  • Other related financial information
The mortgage lender then will tell you that you are pre-approved for a certain loan amount and for various types of mortgage loans. That information can give you tremendous peace of mind as you shop for homes. It also will prepare you for what your future mortgage loan payment will be.

Should You Be Pre-qualified for a Mortgage?

Many home buyers are confused by all the terminology regarding mortgages. As such, they often think that getting pre-qualified for a mortgage is the same as getting pre-approved. This is not the case, as pre-qualification is not as thorough a process. For example pre-qualification:
  • Is a cursory review (by a mortgage loan officer or real estate agent) of your debt-to-income ratio.
  • Typically does not include a review of your credit report.
  • Often is not considered a solid financing commitment by home sellers. Thus, your offer to buy a home may be rejected.
While pre-qualification will give you a general idea of the price range of home you can afford, it pays to go a step beyond and get pre-approved for a mortgage loan. You can then shop with confidence knowing that the homes you are seeing are all in your price range.

About the Author
Allison E. Beatty is a syndicated real estate writer who has been writing home improvement columns for 15 years.

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