Scott Moize Jr.

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What Is A Mortgage Pre-Approval?

February 19, 2014 by Scott Moize Jr.

What Is A Mortgage Pre-Approval?When you are purchasing a home, your broker may recommend you obtain a mortgage pre-approval before you find the home of your dreams.

There are some benefits to being pre-approved before you find a home, but oftentimes, people confuse pre-qualifications with pre-approvals.

So the question many buyers have is what exactly is a mortgage pre-approval?

In a nutshell, it’s when the lender provides you (the buyer) with a letter stating that your mortgage will be granted up to a specific dollar amount.

What Do I Need For Pre-Approval?

In order to obtain a pre-approval for your home purchase, you will have to provide your lender all of the same information you would need to show for qualifying for a mortgage.

This means providing tax returns, bank statements and other documents that prove your net worth, how much you have saved for your down payment and your current obligations.

What Conditions Are Attached To A Pre-Approval?

Generally speaking, a pre-approval does have some caveats attached to it. Typically, you can expect to see some of the following clauses in a pre-approval letter:

  • Interest Rate Changes – a pre-approval is done based on current interest rates. When rates increase, your borrowing power may decrease.
  • Property Passes Inspection – your lender will require the property you ultimately purchase to come in with a proper appraisal and meet all inspection requirements.
  • Credit Check Requirements – regardless of whether it’s been a week or six months since you were pre-approved, your lender will require a new credit report. Changes in your credit report could negate the pre-approval.
  • Changes In Jobs/Assets – after a pre-approval is received, a change in your employment status or any assets may result in the pre-approval becoming worthless.

Getting pre-approved for a home mortgage may allow you more negotiation power with sellers and may help streamline the entire loan process.

It is important however to keep in mind there are still things that may have a negative impact on actually getting the loan.

It is important to make sure you keep in contact with the lender, especially if interest rates increase or your employment status changes after you are pre-approved.

Filed Under: Mortgage Tips Tagged With: Mortgage Tips,Homebuyer Tips,Pre-Approval

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Call (214) 755-5307

NMLS #595311
Servicing Texas
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Consumer Compliant & Recovery Fund Notice

CONSUMERS WISHING TO FILE A COMPLAINT AGAINST A COMPANY OR A RESIDENTIAL MORTGAGE LOAN ORIGINATOR SHOULD COMPLETE AND SEND A COMPLAINT FORM TO THE TEXAS DEPARTMENT OF SAVINGS AND MORTGAGE LENDING, 2601 NORTH LAMAR, SUITE 201, AUSTIN, TEXAS 78705. COMPLAINT FORMS AND INSTRUCTIONS MAY BE OBTAINED FROM THE DEPARTMENT’S WEBSITE AT WWW.SML.TEXAS.GOV. A TOLL-FREE CONSUMER HOTLINE IS AVAILABLE AT 1-877-276-5550.
THE DEPARTMENT MAINTAINS A RECOVERY FUND TO MAKE PAYMENTS OF CERTAIN ACTUAL OUT OF POCKET DAMAGES SUSTAINED BY BORROWERS CAUSED BY ACTS OF LICENSED RESIDENTIALMORTGAGE LOAN ORIGINATORS. A WRITTEN APPLICATION FOR REIMBURSEMENT FROM THE RECOVERY FUND MUST BE FILED WITH AND INVESTIGATED BY THE DEPARTMENT PRIOR TO THE PAYMENT OF A CLAIM. FOR MORE INFORMATION ABOUT THE RECOVERY FUND, PLEASE CONSULT THE DEPARTMENT’S WEBSITE AT WWW.SML.TEXAS.GOV.

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