How to Get a Mortgage Pre-approval
Getting a mortgage can be a confusing and lengthy process. But it doesn’t have to be. The more information you have about the process, the easier it will be. While you don’t need a mortgage until you’ve found a home you’d like to buy, you’ll need to have a mortgage pre-approval beforehand to show sellers that you have the ability to get the financing you’ll need to make the purchase. Even before you get to that step of the process, you might find that a pre-approval letter makes it easier to find real estate agents who want to work with you.
Getting a mortgage pre-approval is necessary not just for placing an offer on a home — it’s also useful for helping you determine your budget for your new home.
What Is a Mortgage Pre-approval?
If you cannot purchase a home at full price outright, then you will need a home loan, or mortgage. Most mortgages are obtained through a loan company or bank. Since mortgages are types of loans, you have to meet certain qualifications to obtain one.
For people who have served or are serving in the United States military and their immediate family members, a VA home loan — or a mortgage that is guaranteed by the Department of Veterans Affairs — offers some advantages over regular mortgages. Issued by private lenders, VA mortgages allow qualifying individuals to purchase a home without having to come up with a cash down payment, as is typical for traditional mortgages. Plus, VA loans do not require homebuyers to carry private mortgage insurance.
Pre-approval is the first step to getting a mortgage loan. Securing a mortgage requires providing your lender a plethora of information and documentation related to your income, creditworthiness, and other financial obligations. The pre-approval process entails the lender reviewing your information and determining whether it can get you approved for the full loan amount. But because full approval is a very involved and lengthy process and depends partly on the actual cost of the house you decide to buy, the full approval process begins only after you’ve made an offer on a house.
How Can I Secure a Pre-approval?
When approaching a seller, it is important to be pre-approved. Many lenders even have a step before pre-approval called pre-qualification. If a lender says you are pre-qualified, it does not mean you are pre-approved for a loan. More likely, it means that you are the kind of consumer they are used to funding. It’s a bit like an invitation to begin the process.
Before applying for pre-approval, you’ll need to gather the necessary documents:
- Tax returns and W2s
- Recent pay stubs
- Employment history documentation
- Recent bank statements
- Documentation on other real estate owned by the borrower
Having such documents ready to share makes the pre-approval process smoother. Banks and lenders ask for these as a minimum to determine if you are capable of repaying a mortgage loan.
To get pre-approved, you must also complete an application for the lender. During pre-approval, lenders usually check:
- Current credit scores and summary, in what’s called a hard inquiry
- Income sources to ensure that you have the income needed to meet the monthly mortgage payments
- Assets that can be used as collateral and can be confiscated in the event that you can’t repay your loan
- Debt-to-income ratio to determine if you can afford to pay on a loan alongside their current debt
VA loans also require a Certificate of Eligibility (COE) from the VA, also known as Form 26-1880. It proves that you meet the VA’s requirements for a VA loan, which includes:
- Having served 181 days of service during peacetime
- Having served 90 days of service during wartime
- Having six years of creditable service in the Reserves or National Guard or 90 days serving under Title 32 with at least 30 of those days being consecutive
- Being the surviving spouse of a service member who died in the line of duty
Service time requirements don’t apply if you’ve been discharged from the service due to a service-connected disability.
With a loan application, a COE, and additional pre-approval documentation in hand, a lender can then evaluate your unique situation to determine how much it can approve you for and at what interest rate. This process usually takes about three business days. The result is a pre-approval letter that you’ll need to submit when you make an offer on a house. That letter may be good for 30 days or as many as 90, depending on the lender.
How Can Hero Loan Help?
Hero Loan makes the pre-approval process easy for veterans and active-duty service members. After you have gathered the appropriate paperwork, our loan officers will help you complete the pre-approval package and request your VA Certificate of Eligibility.
Our process is designed to be pain-free and takes about five minutes to learn if you have been pre-approved. Contact us today to get started on your loan application with one of our experts.