Advantages of Pre-Approval

Pre-approval gives you a good idea of the type of mortgage you will qualify for and the price range of homes you can afford.

It can help you:

• Know how much you can borrow.
• Confirm your ability to qualify for a mortgage based on your credit, financial, and employment information.
• Strengthen your position to make an offer on a house. Sellers are usually more willing to accept offers from pre-approved buyers.

To get pre-approved, you'll need to work with a mortgage lender. The lender will review your credit, financial, and employment information after you fill out an application and provide documentation. A fee might be involved to cover application costs. Be sure to fill out the preapproval documents completely and honestly. Misrepresenting information on these documents can invalidate a preapproval, put you at risk of borrowing more than you can afford and jeopardizing your relationship with your lender.

If you qualify, you'll get a letter that says you are approved to borrow a certain amount of money and for a certain amount of time. Being pre-approved does not mean you have to use that lender or that the loan has been finalized.

Pre-qualification is not the same as pre-approval

A pre-qualification is a free test run of the loan application process that usually takes a few hours. The mortgage lender uses your credit, financial, and employment information to come up with a rough estimate of the amount of money you can potentially borrow. When you are ready to purchase, take the time to get pre-approved. While it is a lengthier process, it is worth it. And, remember, just because you are pre-approved or approved for a certain amount of money, it is ultimately up to you to determine if you can afford the monthly payment based on your spending habits.