What are the steps to getting a preapproval?
As discussed above, the biggest steps of the preapproval process are when your lender:
- Reviews your documents on income and assets
- Performs a credit check
- Writes a preapproval letter stating how much you can afford
From there, your preapproval will typically be good for a few months. If you don’t purchase a home within that time, you’ll need to repeat these steps to renew your preapproval.
Why is getting preapproved for a home loan important?
Presenting a home seller with a mortgage preapproval letter shows your lender has assessed your finances and determined you can afford to purchase a home. A preapproval letter can help your offer stand out and provide the seller with more peace of mind knowing they’re selling to a buyer whose finances have been verified.
Does it hurt your credit score to get preapproved for a mortgage?
If your lender perform a hard inquiry to access your credit report through one of the three main credit bureaus – Equifax™, TransUnion® or Experian® – your credit score may temporarily lower by a few points. Rest assured, though, that this reduction won’t cause significant or long-term damage to your credit.
Can you buy a house for less than your preapproval?
Yes! While your lender may approve you for a large mortgage, you aren’t required to buy a house that’s worth that exact number. When making an offer on a property, you need account for all costs, such as your down payment, closing costs and utility bills as well as other life expenses to make sure you can afford to live in your new home.
What should I do if I can’t get preapproved?
It’s possible that your lender might deny you for preapproval or for the amount you want. Your credit score might be too low, your debt-to-income (DTI) ratio might be too high or the lender might decide your income isn’t adequate for the size of mortgage you want.
If you end up getting denied, talk to your lender about what specific steps you need to take in order to increase your chances of preapproval, and begin planning ways to improve your financial situation.