Before you begin the house hunt for your dream home in Alpharetta, there are several tasks you need to complete. One task that should be at the top of your to-do list is to receive pre-approval for your mortgage.
What is Mortgage Pre-Approval?
Mortgage pre-approval is when a lender has looked at your financial history, credit, assets, and other information to determine how much money they are willing to lend you to purchase a home. If you are pre-approved, you will receive a letter from the lender with an estimate of how much money you can borrow, what your monthly mortgage payment will look like, and your projected interest rate.
Keep in mind that once you receive pre-approval, it does not mean you have locked in the financing. It is an estimate and is based on your current financial situation. If your credit score drops, you do not provide as large of a down payment, your employment changes, etc., this could change the financing listed in the mortgage pre-approval letter.
Do I Have to Receive Pre-Approval For a Mortgage?
No, being approved for a mortgage is not mandatory before you begin searching for homes. However, it is highly recommended and many sellers will expect it. The pre-approval letter shows sellers that you are a serious buyer and that you can receive the funding to purchase the home. If competing against another buyer for a home, if you have a pre-approval letter, you increase the chance that your offer will be accepted.
Additionally, pre-approval will help you personally during the home-buying experience. When you receive pre-approval, you will have information that will help you make wise decisions. You can search for homes that you can actually afford, rather than one that is out of your price range and that you cannot receive the financing to purchase.
How Do I Receive Pre-Approval?
The pre-approval process is fairly straightforward. Your lender will request information to help them determine if they can confidently approve you for a home loan and how much they can let you borrow. The information you will be asked to provide include:
Credit score: Your credit score will determine the type of loan you can qualify for and your interest rate. Scores that are 620 or higher can qualify for government-backed and conventional loan options. If you have a score higher than 700, you may qualify for some of the best interest rates available.
Personal information: Your lender will need personal information such as a valid form of identification, your social security number, etc.
Income: You will need to be prepared to show proof of income. Each lender may have different requirements regarding the type of documents needed such as tax returns, pay stubs, W-2s, etc.
Asset information: Your assets can also help you qualify for a home loan. Be prepared to show your current bank statement. If you are receiving money from a family member to purchase the home, you will need some form of documentation showing this increase in assets.
Often, the mortgage pre-approval process is fast but will vary by lender. It is best to shop around and visit several lenders as they each may provide different loan amounts as well as interest rates.