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Loan pre-approval explained

What is a loan pre-approval? How do you get one and why is it beneficial for home buyers? In this post we’ll give you all the things you need to know about mortgage preapproval.

Approved vs. pre-approved

There is a world of difference between a loan pre-approval and an actual, approved loan. The glaring difference is that loan pre-approval basically indicates whether you are qualified to take out a loan from your chosen lender. It also indicates whether the lender is willing to lend you the amount of money you need.

A good financial background and all the necessary documents

To get a loan pre-approval, you can contact a bank or credit union for a pre-qualification. You can do this over the phone. A loan officer will ask you about your income, assets, and debts, among others, and will tell you the type of loan you’re likely to qualify for. This is not a mandatory process, but it’s a good start.

As for the actual loan pre-approval, you need to set up an appointment with your chosen lending institution. This is when your credit history will be checked. You’ll likely need the following documents as proof of your identity and assets:

  • A copy of your most recent bank statements
  • Your most recent W-2
  • If you’re self-employed, bring your most recent entire tax return
  • Proof of IRAs or retirement accounts
  • Proof of stocks or mutual funds you own, if there are any
  • Driver’s license

If you meet all their requirements, a bank or lending institution will give you a good faith estimate (GFE), which covers the potential terms of your loan. The GFE helps you compare terms from different lenders. It’s a little time-consuming, but worth it in the long run.

I got pre-approved! What’s next?

Congratulations on getting pre-approved! It means one thing: you’re approved to get a loan. So go out there and shop for the loan that works best for you.

Congratulations on getting pre-approved! It means one thing: you’re approved to get a loan. So go out there and shop for the loan that works best for you.

For additional reading, you can check out the following links:
Pre-approval
Understanding the pre-approval process

If you’ve got any questions, don’t hesitate to contact me through the following channels: Jane(at)JaneAtTheLake(dotted)com, 540-493-1690 or 800-858-4653.