As you’re beginning your home search, you’ll see ads time and again about financing and different mortgage lenders. To get you prepared for your home buying journey, let’s examine the pre-approval process from start to finish for East Hanover and Morris County home buyers.
WHAT IS PRE-APPROVAL?
Pre-approval is the process of filling out a mortgage application with a lender and then allowing them to determine how risky it would be for you to receive and pay back a loan from them.
The majority of this activity happens with little input from you outside of your mortgage application. Still, it can be a more drawn-out experience if you’re looking to lend a sizable amount of money or have a less-than-stellar credit history.
WHY DOES IT MATTER?
Going through the steps to get pre-approved for a mortgage provides you with solid leverage when putting in bids and throughout the negotiation process.
Once your chosen lender has approved your mortgage, this gives you an even better negotiating position as you will be able to produce evidence of financial backing on a property clearly. By having a letter of approval from your lender, this could make any offers you put in on a property much more appealing to a seller.
Here are the four important steps in the pre-approval process:
CLEAN UP YOUR FINANCES
Before you begin filling out any mortgage applications, you need to go through your finances with a fine-tooth comb.
Start by getting your credit report from the major credit agencies, which you can request once annually for free. Go through everything in this credit report in order to make sure everything is accurate, and there aren’t any debts outstanding that you may have forgotten about from your past.
Next, create a realistic budget that itemizes all of your regular income and expenditures, and also includes a list of any outstanding debt. Use this budget to try finding areas to save money to either pay down or eliminate those existing debts.
The key with debt management prior to filling out a mortgage application is not necessarily completely paying it off but at least paying it down as much as possible. Start with older debts first to attempt repairing your credit history, and then begin paying off the more recent debts.
FIND YOUR LENDER
Something that often gets forgotten while buying a house is finding the right lender that works for you during the pre-approval process.
Chances are you can get a bunch of recommendations from friends and family, but it’s important that you take some time to shop around and find a lender with which you feel comfortable. If you have an imperfect – or even terrible – credit history, being upfront and honest about your credit issues could save you some time in choosing your lender, and make the entire process easier for you.
DO YOUR PAPERWORK
Once you have found a lender that seems like a good fit, the next step in the pre-approval process is to fill out the lender’s mortgage application.
The application will be fairly straightforward. You will need to provide personal information in order for the lender to request and pull your credit history, and also provide information about the property you’re looking to purchase with the loan. Once you have everything filled out, double-check you provided correct information and send it off to the lender.
STAY IN CONTACT AND COOPERATE
After your application has been submitted, the lender will do everything on their end to determine if you have been approved.
The best thing you can do is be patient, but contacting the lender after a week or two can be helpful as well. They may request a meeting to discuss your application or any problem areas in your credit history. Be polite, professional, and cooperative to give you a leg up in these circumstances.