You’re ready to take a big step forward and search for the home of your dreams. Now comes the big question: Where do you start?
In many cases, successful home buyers start their journey not at an open house or showroom, but in a lender’s office. Securing a mortgage preapproval is one of the most important steps that buyers can take to make the rest of the real estate process go more smoothly, at every step of the way.
The Importance of Getting a Preapproval
In short, it might help to think of a preapproval as the process of determining how much money you will be eligible to borrow before you apply for a loan.
At the end of the preapproval process, buyers will come out with a more complete idea of their loan options and budget, including a hypothetical mortgage interest rate, a list of buying programs they may be eligible for, and written approval for a specific loan amount (typically for a specified period, like 60 or 90 days).
Having a preapproval letter in hand helps put buyers in a very strong position, at every stage of the real estate transaction.
Early on, having a realistic idea about their loan options and budget can help house hunters and their agents make the most of their home search. When you have a realistic view of your finances and price range, you and your broker can spend more time searching for homes that will be the right fit — and less time looking into homes that aren’t really in the cards.
Later, when you start negotiating for the dream home you want to purchase, having a preapproval offers leverage for buyers, and communicates to sellers that you are serious about purchasing their home. When sellers know that you can easily obtain financing and move the process forward, they’ll often be more willing to come to the table. Having a solid preapproval from a lender on your side can also give your offer a leg up if there are multiple bids on a property.
What Goes Into a Preapproval?
In order to secure a preapproval, buyers must fill out an application with a mortgage lender. It’s important to note that due to recent changes in the law, there are certain things a lender cannot require of you for the preapproval, but that will be helpful. Ask them what sort of verification documents would be most useful to them. The more thorough the data you can provide your lender, the more useful the preapproval you receive in return will be.
Generally speaking, lenders and prospective buyers may sort through a number of different personal and financial documents and records, including:
- Personal identification (ID, social security information, U.S. visa, etc.)
- Proof of income (W-2 forms, recent pay stubs, signed tax returns, etc.)
- Proof of assets (bank statements; statements for stocks and bonds, mutual funds, retirement accounts, etc.)
- Employment information (including additional documentation if you are self-employed or a business owner, such as corporate tax returns or profit-and-loss statements)
- Credit reports and scores
With Key Mortgage Services, getting this process started can take less time than you need to brew a cup of coffee.
Key Mortgage recently launched Glyde, a loan application platform that provides buyers with a faster, easier, and more transparent experience than ever. Glyde completely streamlines the mortgage application process, and enables users to easily and securely complete their application in about 15 minutes from their desktop or mobile device.
Prequalification vs. Preapproval
As you begin this process, it’s important to understand the difference between getting preapproved for a loan, and getting prequalified for a loan. These two concepts are similar, but they are not one in the same.
In essence, a prequalification is a lender telling you that you may qualify for a certain type of loan or loan amount, based on information that you self-report. It’s a benchmark, an indication that, based on a broad financial picture, you most likely meet the initial criteria for a loan. As such, getting prequalified is often an extremely quick process, since it requires very limited information. Often, the prequalification won’t go as far in accomplishing your goal of communicating to the seller of your future home that you’re a serious buyer. The ease and quickness of getting a prequalification may be tempting, but a preapproval will be a far more useful tool should you find that home of your dreams.
A preapproval is a more thorough and in-depth process, requiring a more substantive look at your credit and finances. In addition to letting you know if you qualify for a loan, a preapproval will also specify the loan amount and the interest rate, and provide a written commitment from a lender good for a set period of time.
In some ways, you might think of prequalification as the first step to preapproval. Once you know you’re prequalified, you can use this as a launching point to begin preliminary conversations with your mortgage lender and begin exploring and understanding all of the loan options available to you.
Putting Your Dream Home Within Reach
Ready to take the first steps toward finding and purchasing the home of your dreams?
For the past 30 years, Baird & Warner has been offering residential sales, mortgage, and title services all under one roof — because we know it gives our clients a better experience.
When it comes to getting the right loan for your unique circumstances, there are a lot of moving parts. To understand all of your options and create the strategy that will be the right fit for you, don’t hesitate to get in touch with your local Key Mortgage loan officer.
Buying a home is a big deal. With Key Mortgage Services, you can start the journey with someone you can count on.
Throughout the years, Key Mortgage Services has built a reputation for delivering a flawless experience for clients through impeccable execution and timely communication, including offering education, answers, and guidance at every step of the journey — from initial application to closing.
Looking for a second opinion on your current home buying plan? Key Mortgage can help there, as well, thanks to its complimentary Second Look program. With Second Look, a Key Mortgage officer will give you a no obligation, cost-free examination of your current loan structure, mortgage details, and interest rate from another lender. Having this second opinion could mean thousands of dollars in savings over the life of your loan. There are no fees or commitments, and you will receive a $100 gift card regardless of whether or not you decide to go with Key Mortgage.
Bottom line? It’s mortgage made easier. Want to keep the conversation going? Reach out to your local Key Mortgage representative today.