Are you considering getting pre-approved? Remember, getting this approval makes house hunting that much easier. Gain an advantage over other buyers now. But how do you do it? You can do it yourself or with help from a mortgage broker. Be prepared and be informed by reading our guide.
What Does It Mean?
Pre-approval means that the lender is willing to let you borrow money. But it’s still not 100% guaranteed because they first have to check the property you will choose. The advantage is that it gives you an idea of how much you can borrow, and therefore, you can now determine your budget for your house hunting. Moreover, sellers will consider you as a more ideal buyer if you are pre-approved because it means that you are really interested in buying anything and you are financially prepared for it.
Tips for Getting Pre-Approved
Step 1: Finances – is Everything in Order?
Check your money issues before applying for a loan. Is everything right with your income and expenses? How about your debts and credit history? Lenders will check these aspects. Is your credit score good? This will help you get pre-approved faster. You might also get a better interest rate.
Step 2: How Much Can You Borrow? Start Calculating
Next, you should understand your borrowing capacity. If you’re not sure, a mortgage broker can check your financial situation, they will tell you how much you can borrow. Why is this important? Knowing your limit can help you set a realistic budget. This will save you the effort of properties that are out of your price range.
Step 3: Collect All the Required Paperwork
You will be required to submit a range of documents demonstrating your security and stability. These usually consist of;
- Evidence of earnings: These can be provided in the form of payslip records or tax returns from the year or, through a formal letter issued by your employer.
- Record of savings: Bank records indicating your savings and deposits.
- Debts and obligations: These include details regarding loans as well as outstanding balances on credit cards and other financial liabilities.
Make sure you have these documents on hand to help move things along with the pre-approval process.
Step 4: Lender or Mortgage Broker – Which Should You Choose?
When it comes to choosing between approaching a lender or collaborating with a mortgage broker this decision holds significant importance in the process. Direct lenders provide a selection of products compared to brokers who have the ability to present various loan options from multiple lenders. This might result in you securing an advantageous deal instead of going directly to a bank. Also, let’s face it, gathering the right documents can be a hassle. Brokers can help you with this by managing a portion of the paperwork requirements.
Step 5: Submit Your Completed Application
At this point, you should send your pre-approval application form along with your application documents to the lender or broker. Afterwards, they will review and evaluate your documents. In the meantime, you will just have to wait for the response regarding the status of your application for pre-approval expected within a few days.
Step 6: Understand the Conditions of Your Pre-Approval
After passing the application and getting it accepted on the lender’s end, you may receive a letter outlining the terms of your pre-approval. The standard duration of the approved status ranges from 3 to 6 months, although there are some additional factors that depend on it like a property value assessment. Be prepared for that and be sure to keep these terms in mind to avoid any further issues.
Step 7: Start House Hunting
When you have the go-ahead to start finding a house with a determined budget, it becomes easier to concentrate on homes that do not exceed that limit. Moreover, should you bump into a house you love, having a pre-approval may give you an upper hand over other buyers, as they would need more time to secure their financing.
Step 8: Complete Your Mortgage Application
The next step is finalising the arrangement to obtain a loan for your chosen property. The question is, does it meet the lender’s requirements? They will assess the property’s value. If everything is in order, your pre-approval status will turn into formal approval, and you can complete the arrangement for purchasing the property.
Simplify with a Mortgage Broker
You can always go down the DIY route. However, choosing a broker’s service can be invaluable. For one, it will save you time. Moreover, it can be a great resource when you do not want to deal with the complexity of the process. The key advantage of their service is that brokers know the market and can find the best rates for you, which you are unlikely to acquire through your own research as an independent applicant. Many loan options will also be clear when using a broker, such as choosing between a fixed-rate and a variable-rate one.
Moreover, a broker could help handle the documentation to guarantee that your application is thorough and compliant. By partnering with a mortgage broker, you acquire an informed ally who can streamline the loan procedure saving you time and, potentially, money.
AFMS Group: Your Trusted Partner in Home Loans
Buying a home is always a life-changing that comes with many challenges. So it’s important for us to help you with everything you require. Ready to begin your path towards homeownership? We are committed to assisting you with pre-approval. Contact us today.
