Ready to begin the quest for your next home but aren’t sure where to start? Getting approved1 for a mortgage before you go house hunting can help make your home search easier. Whether you’re tired of getting outbid or feel insecure while competing against cash buyers, an approval letter can help you stand out from the sea of buyers and make your offer with the confidence of a cash buyer.
Getting approved is also a great way for renters to begin their homebuying journey and compare renting vs. buying options. An approval can help you learn how much home you can afford so you can plan your homebuying budget and feel confident about buying a home.
WHAT IS A MORTGAGE APPROVAL LETTER
An approval letter is a verified document that declares how much money your lender is willing to loan you for a mortgage. At PrimeLending®, we call this your Buyer’s AdvantEDGE approval1. With an approval letter, you can shop confidently for your next home because you will know exactly how much home you can afford.
In addition to knowing your home buying budget, an approval letter can help you make an offer on the spot, show sellers you are a serious buyer, and get an edge on buyers who haven’t been approved for a mortgage. You might even get some negotiating power at the bargaining table.
To get an idea of what you could afford while you wait on your approval, try this home affordability calculator.
HOW TO GET APPROVED FOR A MORTGAGE
The approval process can be a detail-oriented one but taking the time to get approved for a mortgage can pay off in spades once you’re ready to make an offer. To get approved for a mortgage, you will need to complete a mortgage application. Here’s what you need to know about what it takes to get approved for a mortgage.
Any lender, PrimeLending included, will take several factors into consideration before approving anyone for a mortgage. These include, but may not be limited to, your:
- Debt-to-income ratio (DTI): All of your monthly debts divided by your pre-tax monthly income
- Loan-to-value ratio (LTV): The loan amount divided by the appraised value of the home
- Credit history: Record of how you’ve repaid debts like credit card debt or other loans
- Credit score: Rating that estimates the likelihood a borrower will repay borrowed money
- Proof of income: This can include W-2s, 1099s, child support, alimony, Social Security, etc.
- Employment history: Typically lenders need proof of 2 years of employment
Other documentation that you will need to present to your lender includes pay stubs, bank statements, driver’s license and your Social Security number.
Remember, you aren’t in this process alone. Discuss any questions that you may have with your PrimeLending loan officer so that they can help you keep the process running smoothly.
THE DIFFERENCE BETWEEN QUALIFICATION AND APPROVAL
While qualification2 and approval may sound similar, when it comes to your mortgage application they are two different things. To get qualified means that your income, credit and debt information have been reviewed. Getting approved takes the process a step further to verify all of your information.
The approval process also takes longer than the qualification process because an underwriter reviews all of your finances in great detail. That said, the higher the level of authorization you reach, the more power you can have when you house hunt. With an approval letter, the seller can have more confidence that your offer will likely close without trouble or delay.
Plus, once you know your approval amount, you can use that information on a mortgage calculator to get a better idea of what your monthly payment might look like.
3 BENEFITS OF GETTING APPROVED FOR A MORTGAGE
Getting approved for a mortgage might be a detailed process, but it is well worth it when you start to reap the benefits. These benefits are just a few reasons why you should consider getting approved for a mortgage at the beginning of your homebuying journey, rather than waiting until the end:
- Know what you can afford. Once you are approved for a mortgage, you will know exactly how much home you can afford. Now, you can set an accurate price range and hone in on the homes that you know will work with your homebuying budget.
- Put in a quicker offer. Few things feel worse than losing out on the home of your dreams because someone got in their offer first. By getting approved before you start your home search, you can make an offer the same day you find the perfect home for you.
- Show sellers you’re a serious buyer. Your approval letter will show sellers that you are serious about buying and that you can secure a mortgage. To a seller, an offer made by a buyer with an approval letter could be just as enticing as a cash buyer.
HOW TO STRENGTHEN YOUR OFFER
Getting your approval letter can help set you up for house hunting success and strengthen your offer. But did you know you can make your buying power even stronger? Once you’ve taken the time to get approved, you can follow up with an Appraisal Waiver3 and a Close On Time Guarantee4 as part of Buyer’s AdvantEDGE from PrimeLending.
An Appraisal Waiver can help set you apart from the buying pack and keep you on track to close because it could allow you to get your final loan approved without a full home appraisal report. This could reduce any bumps on your road to closing day. Plus, the Close On Time Guarantee can help you give sellers confidence that your loan will close on time which may make your offer look more attractive.
When in doubt, talk to an expert. Your local PrimeLending loan officer can help walk you through the approval process and answer any mortgage questions you may have. Get started today!
1All loans subject to final credit approval and acceptable property. Conditions and restrictions may apply.
2A qualification is not an approval of credit and does not signify that underwriting requirements have been met. Conditions and restrictions may apply.
3Property inspection waiver specific to borrower and property and is contingent on loan parameters. Borrower will need to be approved. Not available for all loan programs. Additional restrictions and conditions apply.
4Receipt of executed sales contract for property required to guaranty closing by later of closing date or 21 days. Requirements: single family primary residence, FHA or Conventional purchase loan, unexpired Buyer’s AdvantEDGE approval at time of closing, timely satisfaction of inspection/appraisal conditions. Voided by changes in sales contract, loan program, or borrower’s credit, borrower/seller delays, fraud, legal restrictions, or unforeseen circumstances. $5,000 liability limit. Excludes refinance, VA, bond, down payment assistance, renovation/construction, escrow holdbacks, brokered, condos, jumbo, USDA, investment, and unique properties. For full details visit https://www.primelending.com/buyersadvantedge
