2019 Mortgage Pre-approval Guide
One of the first steps in a perspective home owner’s path to purchasing a property is to get prequalified and preapproved. Although the process to becoming preapproved is usually short and easy, here at Kingston Mortgage, we think it is better to have an idea of what the process is and what to expect. Becoming prequalified and preapproved for a loan means the perspective borrower gets a conditional green light that they are able to borrow a certain amount of money. Below you will find an up to date 2019 guide to prequalification and preapproval from Kingston Mortgage.
Pre-qualified VS Pre-approved
Some use the phrases “pre-qualify” and “pre-approval” interchangeably, but in reality, they are two different processes. Pre-qualification is a rough estimate of what you can afford based off a superficial glance of your financial information. Pre-qualification is used as an indicator of whether you are able to afford a mortgage.
In contrast, pre-approval requires a more detailed look into your finances to give a more accurate idea of what the lender will offer in regard to a loan amount and interest rate. A pre-approval only lasts about 90 days. Although you may receive pre-approval, the offer only lasts about 90 days so do not request it too far in advance, or you will need to request another pre-approval.
Usually, one would get pre-qualified before moving ahead to pre-approval. However, if all your paperwork and information is in place, it is possible for you to skip pre-qualification and move straight to pre-approval.
Before receiving pre-approval, a perspective home buyer will need to be able to qualify for a mortgage. To be pre-approved, you will need to qualify for a mortgage. In order to qualify for the mortgage, you will need to do the following criteria: have a minimum credit score of 620, have a debt to income ratio of a maximum of 45%, give a down payment of at least 3% and pay the PMI if your down payment is less than 20%.
How to Become Pre-approved
You will be able to get pre-approval at banks, credit unions, mortgage brokers, and mortgage lenders. It is recommended to get multiple mortgage pre-approvals, roughly around 2-3 different offers. However, it is important to keep in mind that all pre-approval shopping should be done within 2 weeks. Every check on a credit score can affect the score and getting all shopping done within the same 2 weeks will only impact the score once.
During the pre-approval process, lenders will ask for the following information: government issued photo id, social security number, 2 months of bank statements, 1 month of pay stubs, 2 years of W-2 or 1099 tax forms, credit reports and scores from all three bureaus.
What to Expect After Pre-approval
After you have chosen your home, it will be time to fill out an official mortgage application. After you submit your mortgage application, the lender will send you a Loan Estimate 3 days later. Then you will have 10 business days to notify the lender that you wish to proceed with them. Once you do, you will be able to provide additional documentation related to credit, income, proof of down payment funds. Afterwards the loan will go through the underwriting process then the property will be appraised and inspected. If everything goes, well the process should go into approval.