A mortgage preapproval is useful in showing you what you can afford.
On YELLOW, it's also important because it is required before you can visit or make an offer on any homes listed here. Sellers are able to set any preapproval threshold they desire.
Having a preapproval helps both the buyer and seller because it prevents wasting time and resources on a home the buyer cannot afford. Plus, it helps keep sellers safe since they are letting strangers into their home.
- GETTING A PREAPPROVAL -
CONTACT YOUR BANKING INSTUTION FIRST
We recommend buyers first reach out to their current bank or credit union, especially if they are larger banking institutions. The loan consultants with the bank have a wealth of information on loan types and can help determine the best loan for you.
Your bank will also be able to preapprove you for a mortgage, and this can be easier and quicker since you already have a relationship with them.
Getting a preapproval is a fairly straightforward process where you submit some basic info on your financial situation. It's not nearly as involved as applying for the actual mortgage. A preapproval response may take as long as a few minutes with an online lender to a day or two with a traditional lender.
That doesn't mean you have to use them for your mortgage!
Some professionals recommend shopping around and getting preapproval quotes from at least three different lenders. However, we think your bank is usually adequate for a preapproval. You will want to shop around when applying for your actual mortgage after your offer is accepted, however.
FINANCIAL INSTITUTION (BANK, CREDIT UNION, ETC.)
Most major and local banks offer mortgage products, and it's always a good idea to check with your current bank or credit union when looking for a lender. They may offer their current customers preferred rates or discounts.
Nonbank lenders like Quicken Loans and Loan Depot are becoming increasingly popular. However, they may not provide as much assistance and customer support. They may not be the best choice if you are looking for assistance, but may be a good option for a knowledgeable, experienced buyer.
Mortgage brokers don't work for any specific mortgage company. What they do is search multiple lenders to find the best product for you. They are very knowledgable about loan types and can be of as much assistance as the financial institutions. They are usually local, independent companies and will charge a fee that is often rolled into the mortgage.
ONLINE MORTGAGE BROKER
These are like the mortgage broker listed above where they search for the right lender for you, but they are done online. These are the companies like LendingTree.com and Bankrate.com.
ADDITIONAL RESOURCESShould you use a bank or nonbank?
- PREAPPROVAL PROCESS -
The process for a preapproval is fairly straightforward.
You will submit some basic info about your financial situation and provide supporting documents – but it won’t be nearly as thorough as your actual mortgage application you will apply for once you have found a home.
DOCUMENTS NEEDED FOR PREAPPROVAL
The lender will review this information and pull your credit before granting your preapproval. This process is generally accomplished in one day (or even the same day) with large lenders, but can take up to two or three days.
Getting a preapproval may be comforting, but it doesn’t always mean you will eventually be approved for that mortgage.
Once your offer on a home is accepted, you will officially apply for the mortgage.
A mortgage underwriter will have to finalize the mortgage application, which means they need to verify your information, request and review more financial documents, and verify that the property meets certain requirements. This process on average takes about 45 days or longer! It's not uncommon for someone who was preapproved for a mortgage to ultimately be rejected.
COMMON CAUSES OF MORTGAGE REJECTION
Here's an article where the author had their mortgage rejected after having a preapproval:
Home Buying Institute A mortgage rejection tale
- MORTGAGE RESOURCES -
An entire page could be written just on mortgages, but since there’s so much information on mortgages already on the internet, we thought it would be more useful to share links to outside resources that might be helpful.
FIRST TIME HOME BUYERS
QUALIFYING FOR A MORTGAGE
What can you really afford?
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