When you begin looking for a home, one of the most important things you can do is get a mortgage pre-approval. Chances are that you will need to borrow to buy a home. However, lenders are particular about those they lend large sums of money to.
Going through the pre-approval process can help you figure out how much you are eligible to borrow, and provide you with an assurance that you will receive the funding you need. Gone are the days of visiting multiple lenders to shop for the best rate. Instead, you can get a mortgage pre-approval online and compare multiple offers quickly and easily.
Pre-Approval vs. Pre-Qualification
First of all, it’s important to understand the difference between a pre-approval and a pre-qualification. You might see lenders say you are pre-qualified. Basically, pre-qualification acknowledges that you earn a certain amount of money and your credit is acceptable. It doesn’t guarantee a loan amount to you, and things could change once a more thorough examination of your finances is completed.
On the other hand, pre-approval is a more rigorous process. The lender performs a true credit check and requires more documentation of your income. Once the pre-approval is complete, you receive confirmation of exactly how much the lender is willing to let you borrow, and what interest rate you can expect to pay.
Getting a pre-approval provides you with a way to let sellers know you are serious about a home, and it gives you solid information to use as you move forward with the home buying process.
Get A Mortgage Pre-Approval Online
Thanks to technology, it’s possible to get your mortgage pre-approval online. You can share information by uploading the appropriate documents and authorizing a lender to check your credit. In fact, thanks to websites that allow you to compare mortgage offers, it’s possible to fill out one form and receive several pre-approvals at once.
To get a mortgage pre-approval online, you will need the following information readily available:
- Proof of income (W-2s, paystubs)
- Bank account statements
- Other financial statements (investments and retirement accounts) that offer insight into your assets
You will also need to sign a waiver that allows the lenders to check your credit score. Since your credit is one of the most important factors used in determining your eligibility for a loan and in setting your interest rate, you will need a good credit score to qualify for the best interest rates.
If you want the guarantee of the best mortgage rate, you need a FICO score of at least 720. You can still easily qualify for a mortgage when you have a score of between 660 and 719, but you might not be able to get the best possible interest rate on your home loan. You might also have fewer options when it comes to lenders. With a credit score of below 660, the pool to choose from becomes even smaller, and it’s practically impossible to get a conventional mortgage if your score is below 620. You can still get approved for a mortgage with such a low score, but your interest rate will be much, much higher.
Depending on the site you use, you might need to scan copies of the needed documents to upload as you apply for pre-approval. In other cases, though, simply filling in the form with the information is enough — although at some point you will need to provide verification of the information for potential lenders. You will need to provide your Social Security number so that your credit score can be pulled.
You can choose the loan with the terms that work best for you, and be well on your way to homeownership. Once you have your online mortgage pre-approval, you can use the letter as you look for a home to buy. It doesn’t matter whether your pre-approval comes from an online lender or a brick and mortar lender; in the end, what matters is that someone is willing to lend you money to buy a home.