Mortgage Pre-Approval Guide

Mortgage pre-approval is a preliminary evaluation by a lender that determines how much money you can borrow for a home purchase. During this process, the lender reviews your financial information—including your income, assets, debts, and credit history—to determine your creditworthiness and how much they're willing to lend you.

When you receive a pre-approval, you'll get a pre-approval letter stating the loan amount you qualify for, the type of mortgage, and the interest rate you can expect to pay. This letter serves as evidence to sellers that you're a serious buyer with the financial backing to complete the purchase.

It's important to note that a pre-approval is not a guarantee of a loan. The final loan approval will come after you've found a home, submitted a complete application, and the property has been appraised and evaluated by the lender.

Getting pre-approved for a mortgage before you start house hunting offers several significant advantages:

• Know your budget: Pre-approval clarifies exactly how much house you can afford, preventing you from wasting time looking at properties outside your price range.
• Stronger negotiating position: Sellers are more likely to take your offer seriously when you have a pre-approval letter, especially in competitive markets.
• Faster closing process: Since much of your financial information has already been verified, the final loan approval process can move more quickly once you've found a home.
• Identify credit issues: The pre-approval process may uncover issues with your credit that you can address before they become obstacles to your home purchase.
• Rate lock opportunity: Some lenders will allow you to lock in an interest rate during the pre-approval process, protecting you from rate increases while you shop.

In today's competitive Texas housing market, having a pre-approval letter is practically a necessity. Many sellers won't even consider offers from buyers who haven't been pre-approved.

Pre-qualification and pre-approval are often confused, but they're different processes with varying levels of scrutiny:

While getting pre-qualified can be a helpful first step to gauge your general price range, serious homebuyers should always get pre-approved before making offers.

To get pre-approved for a mortgage, you'll need to provide several documents that verify your financial situation. Having these ready in advance can speed up the process:

• Proof of identity: Government-issued photo ID (driver's license, passport)
• Proof of income:
  • W-2 statements from the past two years
  • Pay stubs from the past 30-60 days
  • Federal tax returns from the past two years
  • If self-employed: profit and loss statements, business tax returns
• Proof of assets:
  • Bank statements from the past 60-90 days
  • Investment account statements (401(k), IRA, stock accounts)
  • Documentation of other real estate owned
  • Gift letters if you're receiving down payment assistance from family
• Debt information:
  • Credit card statements
  • Student loan statements
  • Auto loan statements
  • Alimony or child support documentation (if applicable)
• Additional documents:
  • Rental payment history or canceled rent checks
  • Divorce decree (if applicable)
  • Bankruptcy discharge documents (if applicable)

Your lender may request additional documents based on your specific situation. Being organized and responsive to these requests will help move your pre-approval along quickly.

The mortgage pre-approval process typically follows these steps:

1. 1. Complete an application

   Fill out a mortgage application, providing details about your income, employment, assets, and the type of loan you're seeking. At Raider Mortgage Co., you can complete this application online, over the phone, or in person.

2. 2. Authorize a credit check

   The lender will perform a hard credit inquiry to review your credit report and score. This gives them insight into your debt management history and creditworthiness.

3. 3. Submit financial documentation

   Provide all the required documents listed in the previous section. Prompt submission of complete, accurate documentation helps speed up the process.

4. 4. Review by underwriter

   A mortgage underwriter will review all your information to assess your risk level and verify you meet the lender's criteria for the loan program you're applying for.

5. 5. Receive pre-approval letter

   If approved, you'll receive a pre-approval letter specifying the loan amount, program, and terms. This typically happens within a few days to a week after submitting your complete application package.

Mortgage pre-approvals don't last indefinitely. Typically, they're valid for 60 to 90 days, depending on the lender. This time limit exists because:

• Your financial situation may change
• Your credit score might fluctuate
• Interest rates can shift
• Lending guidelines may be updated

If your pre-approval expires before you find a home, you can usually renew it by providing updated financial information and allowing another credit check. To avoid this, try to time your pre-approval application when you're ready to start house hunting seriously.

Follow these tips to ensure your mortgage pre-approval process goes smoothly: