15 Dec The Challenge And Value Of Being Preapproved
One of the first steps in the homebuying process can also be one of the most complicated for potential mortgage borrowers. The task of becoming preapproved for a mortgage can take a lot of work, but it is a necessary starting point for those looking to buy property down the line. From improving your credit score to cataloging all of your assets, the preapproval stage is a requirement before a home can be purchased and a mortgage loan can be agreed upon.
Understanding the importance of the preapproval stage and going about the preapproval process step-by-step can help a customer. The less time it takes to be approved, the faster you can go about buying a home and securing a mortgage. Review the importance of the preapproval stage so that you are better prepared when it comes times to be approved.
A preapproval can make it easier for first-time homebuyers to receive the funding they need.
What The Preapproval Process Includes
Like acquiring an actual mortgage, being preapproved for a mortgage means a thorough review of your personal assets and finances. This process allows a lending agency to determine how much money they should let you borrow. From credit card statements and car loans to weekly paychecks, a lender wants to ensure you are not a liability before they guarantee you a loan.
According to Realtor.com, there are four areas of personal finances to monitor and improve before starting the preapproval process: income, debt, assets and credit. All four are relevant to mortgage agencies, because the people lending you money to buy property want the confidence that you will be able to pay it back. Showing how much money you bring in per year, the amount you owe elsewhere, what you own of value and how efficient you are at paying back previous debt gives mortgage lenders the information they need to make an informed decision.
Along with making sure your own finances are in order, the preapproval process serves as an introduction of sorts, as it helps a lender learn more about you. It also prepares you for the actual mortgage application. Jordan Roth, a mortgage specialist in Glen Rock, New Jersey, said to BankRate that preapproval verification benefits both parties, so that there are no surprises when it comes time toprovide finances after property has been purchased.
“The documents to get preapproved are the same documents that you would need to get a mortgage,” Roth said. “Pay stubs, last two years’ W-2s, last two federal returns, two months’ worth of bank statements of all types of accounts, your credit report.”
Going into the preapproval stage with a strong understanding of the process’s value and how it can help you secure finances in the future will help both you and the lending agency be prepared when the time comes to hammer out an actual deal.
Understanding The Importance Of Preapprovals
Many people don’t understand why a preapproval is done, or how it differentiates from a prequalification. The truth is, the process is vital so that you are able to get the mortgage rate that best fits your financial situation when you do choose to buy property. The first stage of the homebuying schedule sets the tone for every decision made after that.
Going through the preapproval process gives you the knowledge needed to make informed decisions. NerdWallet explained that real estate agents often want financing secured within a specific time period of a closing, so the sale can be completed. Sometimes, that period can be as brief as one week. By being preapproved, you will already have your finances in order, so you can inform your lender and begin the mortgage application process immediately.
Some people choose to go with prequalification instead of preapproval. Prequalification is also a review of your finances, but it does not go as in-depth as the approval process does. Because it is less rigorous, you are not locked into any rate, so that when you do want to apply for an actual mortgage, you still have to be approved by a lending agency.
Being preapproved can take time, and many people are confused by the process. Because it is so complex, it can be helpful to have an expert walk you through it. Contact the mortgage experts at W.J. Bradley to learn more about preapprovals and how they can help you become a first-time homeowner.