Should You Get Pre-Approved Before Shopping For A Home?
As you prepare to apply for a mortgage, you’ll probably hear that it’s a good idea to get pre-approved or pre-qualified before shopping for a home. Before deciding whether you should get pre-approved or pre-qualified, let’s define what those two terms mean.
“Pre-approval” and “pre-qualification” are terms often used interchangeably when applying for a mortgage, but the terms mean something different.
Pre-qualification is an initial step where a lender assesses your financial information based on what you provide. It’s often a quick and informal process where you share details like income, debts, and assets. Based on the information you provide, the lender can give you an estimate of how much you might be able to borrow. In other words, pre-qualification does not involve a deep dive into your credit report or a full loan application.
Pre-approval on the other hand is more comprehensive. With a pre-approval, you will submit an actual loan application and the lender performs a thorough examination of your finances, including pulling your credit report. With a pre-approval, the lender provides a conditional commitment for a specific loan amount, given that all the information provided checks out during the underwriting process. A pre-approval holds more weight as it shows sellers you’re serious and have undergone a more rigorous financial evaluation.
To summarize, a pre-qualification is an initial quick assessment of how much you can borrow based on the information you provide. While a pre-approval is typically a stronger indication of your borrowing capacity and might be more appealing to sellers.
So depending on how serious you are about buying, you should get pre-approved because it can help you in the hunt for the perfect home. Pre-approval is an important step in the home-buying process that shows you can get a loan and makes the lending process faster so you can close on your new home quickly.
It’s important to get pre-approved before looking for a house. You should only start the home loan pre-approval process if you’re serious about buying a house soon because approvals expire.
Start the mortgage pre-approval process with Arkansas Federal Credit Union today by speaking with our mortgage lending team or by getting a quote online. Get pre-approved for a home loan today so you can move through the home-buying process quickly.
What You’ll Need to Get Pre-Approved
Getting pre-approved for a home loan involves your lender investigating your financial information. In order to get pre-approved for a mortgage, you will need to provide financial and identifying documentation for your lender.
Commonly required documentation includes:
- Driver’s license
- Credit history
- Proof of employment or income
- Social security number
These are just a few examples of documentation that could be required in order for you to get pre-approved for a home loan. Before starting the pre-approval process, checking your financials, like your credit score, is important so you don’t have any unexpected surprises.
When Should You Get Pre-Approved?
The best time to get pre-approved for a mortgage is before you start looking at homes. Desirable homes go on and off the market quickly, so giving yourself an advantage by getting pre-approved can help you move quickly, too. It’s important to put yourself in the best position to be able to buy a home when you find one that’s right for you.
Getting pre-approved before you start the process can make it more likely that an offer you put down will be accepted. Someone who’s pre-approved is considered a low-risk buyer. You may look more appealing to the seller because you’ve already been approved for a mortgage.
There are a lot of potential benefits to getting pre-approved before shopping for a home. Mortgage pre-approval before house shopping can lead to shorter closing periods and could potentially get you faster home showings. Many realtors also require pre-approval before they’ll work with you to shop for a home.
Mortgage pre-approvals typically expire. A pre-approval can be good for as long as 90 days but could be as short as one month. You shouldn’t get pre-approved for a mortgage unless you are serious about buying a home.
Should You Choose a Lender or a Realtor First?
Choosing a lender before you find your realtor can help you with home-buying. If you already have a lender and are pre-approved for a mortgage, you may be able to get a better realtor.
Before deciding on a realtor, talking to multiple realtors is a good idea. Most realtors don’t let you work with another realtor once you start working with them, and you could be stuck. You can take your time and shop around with realtors before deciding who you want to work with.
The timing of whether you should get a lender or realtor first all depends on how quickly you plan on completing a new home purchase and the market conditions you’re buying in. Because of the time limits on pre-approvals, you may want to speak with realtors and do your research first, get pre-approval, and then start the search for your new home with your favorite realtor.
Should You Get Pre-Approved With Multiple Lenders?
You don’t need to get pre-approved with multiple lenders, but you should compare lenders and look for the best rates.
There are multiple steps to preparing for seriously shopping for a home. Getting pre-qualified for a loan might be a good idea, so you have a good idea of a loan amount you may qualify for before getting pre-approved. Being pre-qualified with lenders can make the approval process faster and help research the best home loan rates for your financial situation.
Shopping around with different lenders and comparing rates is a good idea, but applying for pre-approval with multiple lenders might not be a good idea. You will only need one pre-approval letter, and applying for pre-approval with lenders could hurt your credit score, as pre-approval requires a hard credit check.
Can You Be Denied a Mortgage After Pre-Approval?
It’s not very common to be denied a mortgage after getting pre-approved, but it can still happen.
One of the main reasons you could be denied a mortgage after a pre-approval is if your financial situation changes. For example, losing your job or changing jobs could impact your ability to get a mortgage. However, starting a new job in the same or similar field with no major change in income shouldn’t impact your mortgage approval.
Pre-approvals are usually only valid for 60-90 days. If your pre-approval expires before you apply for a mortgage, you could be denied a mortgage that fits into your previous pre-approval.
Home loans complete the home appraisal during the underwriting of a home loan, which makes sure the home is worth the sales price. A bank appraisal can cause your home loan to be denied. An appraisal will examine many factors that could cause your mortgage to be denied. Depending on your bank and the type of mortgage you’re applying for, different factors that impact the price of the home being higher than the appraised value could cause your mortgage to be denied.
Home condition or inspection could also impact your mortgage approval. If the home is in poor condition, your lender might require the home to be improved or fixed up before you can get a mortgage.
Changing lender guidelines can also impact mortgage approval. A lender might give you pre-approval with a certain debt-to-income ratio, and they might later implement guidelines only to accept loans with a lower debt-to-income ratio to have loans with less risk. Unfortunately, there’s not much you can do about this. Even though you didn’t do anything wrong, there might not be anything that you could do.
Get Pre-Approved Today
Getting mortgage pre-approval before you start looking at homes can help make home-buying easier and faster.
You can start the online mortgage pre-approval process today with Arkansas Federal. The process of getting mortgage pre-approval online is simple and easy, and you won’t even have to leave your house.
Contact Arkansas Federal or visit one of our local branches to start the mortgage pre-approval process.