Mortgage pre-approval process

Introduction

It is a very important factor to get a mortgage pre-approval in the process of buying a home as it defines the buyer's budget and demonstrates his/her earnestness to the sellers. The pre-approval process is fully explained at Grace Real Estate Company (GREC) so that clients are well equipped for the challenges in the real estate market. This article discusses the process of getting pre-approved for a mortgage, the advantages and how to increase the chances of getting pre-approved.

What is Mortgage Pre-Approval?

Mortgage pre-approval is a preliminary decision of a credit institution to grant you credit up to a certain amount taking into consideration all the necessary factors. While pre-qualification is an initial assessment, pre-approval involves paperwork and credit check and is more accurate in terms of assessing the client’s borrowing power.

Benefits of Mortgage Pre-Approval

  1. Establishing a Budget: 

    2. Pre-approval gives you an understanding of the price range which you can afford to offer to the real estate agents.

  1. Strengthening Your Offer: 

    2. Self employed and real estate agents consider pre-approved buyers serious and financially capable hence improving your bargaining power.

  1. Speeding Up the Closing Process: 

    2. Pre-approval can help since most of the paperwork is done at this stage, and it will only take a shorter time once you have identified a home.

How to Get a Mortgage Pre-Approval

  1. Check Your Credit Score

    2. Credit score is very important when it comes to mortgage approval. You should order your credit report and fix the problems if you have any. The score is higher – the better conditions you can get when signing the contract.

  1. Gather Financial Documents

    2. Prepare essential documents, including:

  • Two forms of identification are usually required. It could be a passport, certificate of citizenship or just a driver's license.

  • Documentation such as pay stubs, tax returns that demonstrate the borrower’s income.

  • Bank statements

  • Employment verification

  • Details of the previous borrowings and resources

Choose the Right Lender

To obtain the loan, one needs to research and compare the lenders as they will find some lenders charging higher interest rates while others have better offers. GREC can help in providing you with suitable lenders that would meet your requirements.

  1. Submit Your Application

    2. It is necessary to fill in the pre-approval application of the lender with the information about the financial status. Expect that you will be subjected to a ‘hard credit check’, which results in a slight dip on your credit score.

  1. Undergo a Credit Check

    2. Lenders will look at your credit history and at your credit score to determine your creditworthiness. Check that your credit report is in order and does not contain any errors.

  1. Receive Your Pre-Approval Letter

    2. If approved, you will get a pre-approval letter that contains your loan amount approval, loan type, and loan terms. This letter is usually valid for a certain period of time, ranging from 60-90 days for instance.

Strategies to Increase the Probability of Pre-Approval

  1. Improve Your Credit Score: 

    2. Reduce your balances, make payments on time and don’t apply for new credit cards or loans beforehand.

  1. Reduce Debt-to-Income Ratio (DTI): 

    2. Banks like the DTI ratio to be below 43%. This will reduce the DTI because paying off these debts will help reduce the balance.

  1. Save for a Down Payment: 

    2. A larger down payment implies that one has a lesser amount to borrow, which is always a plus factor when it comes to borrowing.

  1. Maintain Stable Employment: 

    2. Stable income history is important to the lenders because it shows that you have a steady job.

  1. Avoid Major Purchases: 

    2. Do not make large purchases that are likely to affect credit score or amount of debt one intends to take until after applying for pre-approval.

The Role of Grace Real Estate Company

GREC offers consulting services before the approval of the structure, in the form of guidelines and assistance. Our team is always ready to explain the conditions of lenders, collect the necessary documents, and select the appropriate credit companies. As you can see, with the help of GREC, you can go through the stage of pre-approval and get closer to the acquisition of your own home.

Conclusion

Mortgage pre-approval is a critical part of the home buying process because it provides financial certainty and strengthens your bargaining power. Knowing each process and dealing with Grace Real Estate Company, one can get pre-approval and lay down the right base for the search of a home.

Bottom Line

Mortgage pre-approval gives the borrower a good idea of how much he or she can borrow and puts you in a stronger negotiating power in the real estate market. Let Grace Real Estate Company help you go through the pre-approval process as we want to make your homeownership dream come true. The following steps towards the purchase of your new home can be taken with the help of GREC’s expertise.


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