Pre-approval is a guarantee from a lender that states how much money that you are approved to borrow. The amount you can borrow is based on your credit score, assets, debts and income.
Getting pre-approved is important because it can help your real estate agent find homes within your budget and increases the speed of closing on a house.
Understand your Budget
Before starting this step, you should have determined your budget and understand your financial situation. This includes listing all of your revenue streams, spending, and short-term debt. Additionally you should check your credit score.
If you do not have this information, please go back to step: Plan your Budget
Choosing a lender
Lenders lend money to buyers to purchase homes for a fee known as interest and costing costs. There are often variations in interest rates and closing costs between lenders, which is why it’s essential to do your homework.
When comparing lenders, ask each one to provide you with a Loan Estimate, which will spell out the loan terms, project payments and closing costs for your potential mortgage. This form is provided in a universal format, making it simple for you to compare lenders.
Free Guide : Shop, compare, negotiate the best loan – brochure
Get Preapproved
With all of the information about each lender, now you get to select the best one a apply for a pre-approval. Getting preapproved for a loan requires a thorough investigation of your finances including verification of your income, assets and credit rating.
If your application is accepted then you are guaranteed that you will able to obtain the loan for a home, assuming your finances don’t change between preapproval and closing on the home.
Read more about Getting Pre-Approved for a loan
Next Step: Build your Team
You can also use our First Time Buyers Checklist to track and record your progress and next steps.
Learn how to pay off your mortgage faster and save thousands on interest.*
