How and When Should I Get Pre-Approved for a Mortgage?

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Getting pre-approved is an important and helpful step in buying a new home. Getting pre-approved for a mortgage before searching for a home helps homebuyers understand how much they will actually be able to afford before they start house hunting. It is a good idea to get pre-approved before you start looking for a home because it will provide you with a range of reasonable expectations in terms of what you can afford, and makes sure you do not fall in love with an overpriced home before you have an understanding of what you can actually afford.

How do I get pre-approved

When looking to get pre-approved for a mortgage you should start off by shopping around the mortgage lending market and finding lenders you are providing rates that will work for you. Once you have found a lender with a rate you like that you believe you can afford, you can start the process of getting pre-approved for a mortgage with that lender.

Once you have found a lender you like the first step is to fill out a mortgage application including your social security number so the lender can check your credit. Lenders will also look at other key factors surrounding your personal finances to decide whether or not they want to give you a pre-approval. These factors include:

  • Your credit score
  • Your credit history
  • Your employment history
  • Your income
  • Your assets and liabilities
  • Your debt-to-income ratio

A pre-approval is essentially a lender taking a deep dive into your finances to get a better understanding of your financial health so they can understand whether or not you can actually afford to pay them back on your loan.

When should I get pre-approved

Pre-approvals from lenders do have a time limit and are usually only valid for 60 to 90 days. Lenders give pre-approvals expiration dates because your credit and finances could change significantly over that period of time. Because of this time constraint it is important to also understand when you should get pre-approved during the process of buying a home.

You may want to use a pre-approval as a way of understanding your credit and finances if you are at all worried about actually getting a mortgage. If this is the case, it is important to do this early in the process (about 6 months to a year in advance), and the expiration date is not important as you will likely let it expire anyways. Using pre-approvals to understand your finances can give you an idea of any issues concerning your credit, and give you the time the time to address said issues.

If you believe your finances are sound, your seller will most likely ask to see your mortgage pre-approval to prove that you are a serious buyer. This means that you should be getting pre-approved during the part of the process where you are beginning to meeting with sellers.