You’re not required to get preapproved for a mortgage, but there are many benefits of doing so:
- To learn how much of a home you can afford.
- To better compete with other potential buyers.
- To understand if/how you can improve your finances.
With this insight, it’s a good idea to get preapproved for a mortgage before you begin your home search.
However, there are things you need to do to make this happen.
Is a mortgage preapproval required?
As noted above, a preapproval is not required to browse listings, visit homes, or even make an offer.
But if you want to put yourself in the best position to secure a loan, you should get a preapproval as soon as possible. Without this, you could find yourself looking at homes that you can’t afford.
Once you locate a home that you want to purchase, your offer may not be taken seriously unless you’re preapproved, especially in a competitive market.
What documents are needed for mortgage preapproval?
Preapproval requirements vary from lender to lender, but some documents are generally required across the board, including:
- Identification, such as a driver’s license, Social Security card, or passport
- Income verification, including W-2 forms for the past two years, bank statements, pay stubs for the past 30 days, and personal tax returns for the past two years
- Debt statements, such as student loans, credit card bank statements, auto loans, or tax liens. Tip: don’t attempt to hide liabilities from your lender.
- Proof of assets, including bank accounts, retirement accounts, and brokerage accounts. If it’s an asset, even if you don’t deem it important, let your lender know about it.
- Other documents (if applicable), such as rent history, divorce decree, and down payment gift letter.
Request a list of required documents from your lender. Gathering these ahead of time will help to speed up the preapproval process.
How long does it take to get preapproved?
This varies from lender to lender, but you can expect to wait one to three business days for an approval or denial. Some online lenders can process preapproval requests sooner, often within 24 hours.
Note: Your preapproval won’t last forever. Most lenders give you a preapproval for 60 to 90 days. After that, you’re required to once again go through the preapproval process. This protects them if your financial circumstances have changed for the worse.
How early should I apply for preapproval?
As a general rule of thumb, apply for preapproval once you’re actively in the market for a new home. This does two things:
- Proves that you can afford the home, which increases the likelihood of striking a deal with the seller.
- Gives you as much time as possible to find a home that you want to buy.
If you wait too long — such as until you’re ready to make an offer — you’ll slow yourself down. And in a competitive housing market, this can be the difference between an accepted offer or losing out to another buyer.
What does it cost to get preapproved?
Most lenders offer a mortgage preapproval free of cost. They do so with the hope that they’ll eventually earn your business, thus allowing them to make money on the mortgage itself.
This isn’t the case with every lender, however. Some charge an application fee in the range of $300 to $500. You should think twice before paying a fee to get preapproved for a mortgage, as there are plenty of free options to consider.
Tip: Before you start your application, ask the lender if they charge a fee for obtaining a preapproval. This reduces the risk of wasting valuable time.
Get preapproved for a mortgage in three easy steps
Now that you’re in the right frame of mind, it’s time to take action and get preapproved for a mortgage so that you can begin your home search.
There are three easy steps you can take to make this happen:
- Find a lender: This is the most important step, as you want to collaborate with a reputable lender that has your best interests in mind.
- Collect the necessary documents: The sooner you collect these documents (see above), the sooner you can complete your preapproval application. Start the process as soon as you can, as it may take some time to collect documents such as tax returns and bank statements.
- Complete an application: The final step is to complete a preapproval application. If you need any assistance, contact your lender for guidance. A loan officer can answer your questions and address any concerns.
It really is that simple to move through the mortgage preapproval process. There’s no guarantee of approval, but it should be simple and stress-free.
Preapproval: The first step in buying your dream home
Unless you’re buying your home with cash, you’ll probably need a mortgage to complete the transaction.
Once you take the first step you’ll feel more confident in your ability to search for homes in your price range and make an offer when the opportunity comes around.
If you want an experienced and knowledgeable financial partner on your side, AAA Banking can guide you from start to finish. We take great pride in providing class-leading customer service, along with a simplified and efficient preapproval process.
Buying a home is supposed to be one of the best experiences of your life. And since it’s one of the biggest purchases you’ll ever make, you don’t want to stray down the wrong path.
Contact one of our loan officers today to learn more about our services and how AAA Banking can be your partner in home buying success.