Buy a house is exciting. It’s one of the biggest steps that you’ll ever take forward in your life. But there are boring parts, too, and dealing with a mortgage is one of those parts. In order to actually move towards buying a house, it is vital to get pre-approval for a mortgage. Not only does pre-approval establish an expectation for your mortgage rates and what you’ll be able to get, but many home sellers won’t even seriously negotiate with someone who has yet to get pre-approved for their mortgage. So what exactly does pre-approval mean?
What is Pre-Approval?
Essentially, a pre-approval is an agreement to provide some amount of money towards a house. It isn’t a final approval, but it’s a pretty solid step towards one. Once a bank has pre-approved you, they have put some amount of a stake in the expectation that if you buy the house, they will finance it. If, for some reason, they decide that they can’t actually offer you the loan, they are still partially committed. Therefore, unless the reason is very, very good, most often, a pre-approval means you’re very likely to get the loan. Furthermore, it will inform you as to the parameters of your expected loan, how much you can borrow, what your rates are going to be. It’s not solidified, but it is a very good indicator.
Pre-Qualification vs. Pre-Approval
There is another, similar concept when it comes to mortgage lending, known as pre-qualification, that many people often get mixed up. Pre-qualification is pretty much like a projection or an estimate; it’s a lenders prediction of what a loan might look like, without getting into a lot of the specifics or fine details. Unlike a pre-approval, it is not a commitment to anything on the part of the bank, and will not have any weight when talking to home sellers. This is just the very first step in a long process, more akin to window shopping than anything.
How to Get Pre-Approved
The key to getting pre-approved is to be financially stable, and to be able to provide a lot of information proving it. Banks will ask for credit history, employment history, tax returns, pay stubs, bank account statements, all of the financial paperwork that you can muster. Essentially, they’re trying to determine beyond the shadow of a doubt that you are going to be capable of fulfilling your end of the bargain. If they do, then you’ll be able to get a mortgage pre-approval in Raleigh, NC.
