TIPS ON GETTING YOUR PRE-APPROVAL FOR A MORTGAGE LOAN
A pre-approval is a document or letter from your mortgage lender stating how much house you are qualified for. On this letter, it will state your estimated interest rate, down payment, and type of loan.
It’s imperative you obtain one prior to house shopping. The last thing you want to do is find the house of your dreams only to find out you can’t get approved for it. That’s a devastating feeling!
Great question. If you are committed to buying a house in Houston, the first step is finding a lender to work with. If you don’t have a relationship with a mortgage lender already, talk with your agent if you have one. If you don’t, you can always reach out to us to see who we recommend.
Our team works with the best in the business and have vetted our preferred lenders thoroughly. We made it easy and provided a link on our home page to get pre-approved, should take about 5 minutes to fill out the application. Click here to view our preferred lender and the application process.
Assuming you have found a lender to work with, first fill out an application online. The lender will then reach out to you directly after they have pulled your credit and ask for additional documents such as W-2s, tax returns, and pay stubs.
Once everything is verified, your file goes through their automatic underwriting system. Upon approval, you will receive your pre-approval letter with the amount you qualify for!
That whole process could take 24-48 hours, depending on how fast you can get documents over to the lender and how busy they are. Not too bad huh?
QUICK NOTE ABOUT APPROVAL AMOUNT
I want to make this quick note… just because you are approved for a certain amount does not mean you have to spend that much!
You know your finances more than anyone else, so make sure you are comfortable with the monthly payments.
Now I wouldn’t focus too much on price, because here in Houston two identical properties in different locations can vary wildly in monthly payments due to property taxes and insurance.
Whether you hire us as your Houston real estate agent or someone else, they should be able to guide you in the right direction and give you some quick estimates on property / locations you are interested in.
SO WHAT ABOUT LOAN TYPES AND INTEREST RATES?
This is a discussion you will have with your lender. They will be able to determine what type of loan is best and cheapest for you. There is no right answer to this as everyone is different and unique in their own way.
The most common types of loans we see are Conventional, FHA, and VA.
So when you submit for a pre-approval letter, the lender will be able to tell you the different qualification for each of these. And the letter will have your loan type and projected interest rates as well.
We did make a video covering loan types so be sure to check that out as well!
YOU NEED A PRE-APPROVAL TO SUBMIT AN OFFER
Don’t wait until the last minute to get a pre-approval. Let’s say you know for a fact you will get approved for the amount you want. Well, the Houston real estate market is on fire right now. As of this writing, its completely a sellers’ market. Meaning you, the buyer, have a ton of competition to go up against.
Why am I telling you this? Because when you finally find the house you’ve been looking for, you won’t have time to get your pre-approval before someone else submits an offer. Meaning you just lost the house.
Sellers and their agent will not accept any offer without a pre-approval letter in hand.
Why? Well put yourself in the sellers shoes for a moment. If someone offered to buy your house how would you know they can qualify for it to begin with?
Would you accept a blind offer not knowing if the buyer will just drag you along only to find out 21 days into the contract they can’t get financing? I hope not!
I hope you see the importance of a getting your pre-approval BEFORE shopping the Houston real estate market.
WHAT HAPPENS IF YOU CAN’T GET APPROVED?
It happens more than you think. Back in the early 2000’s your fish or dog could get a mortgage. It was bad. This type of lending practice is what ultimately led to the historic real estate market crash of 2007-2008.
Since the recovery, lenders have greatly tightened their parameters for approvals.
There are dozens of reasons why someone may get denied. Debt to income is too high, they don’t have enough income, bad credit etc. Be sure to check out our video about credit repair and buying a house with bad credit.
If you find yourself in this boat, don’t worry! If you get denied, the lender will be able to tell you what you need to work on so you can obtain financing.
Whether it’s as simple as opening a credit card, paying down debt, or complex issues like extensive credit repair. Whatever the case is, you will have some sort of direction on where to go from here.
The bigger question you need to ask yourself is, how committed are you to achieving the American dream of homeownership?