Purchasing a home will be the single largest expense that most people have in their lifetime. To complete this purchase a mortgage loan will often be necessary. If you will require a mortgage loan to purchase a home, you may be rather anxious to start the process of getting approved for funding. However, before you start putting in loan applications with different lenders, there are a few things that you should know.
#1: The Terms Pre-Approved And Pre-Qualified Are Not Interchangeable
People often make the mistake of believing the terms pre-approved and pre-qualified mean the same thing when applying for a mortgage loan. However, there is a very important difference between these two terms. When you are pre-qualified for a mortgage, a lender is making this statement solely based on the non-verified information that you provide. Essentially, this means that if the information you provided is correct, they anticipate that you would qualify for a mortgage loan. Being pre-approved on the other hand means that the lender has verified most of your information and that as long as this information continues to be accurate, they are willing to approve you for a mortgage loan. For this reason, a letter of pre-approval will be far more useful when shopping for homes when compared to a letter of pre-qualification.
#2: Lenders Look At More Than Just Your Credit Score
It is quite common for loan applicants to focus on improving their credit scores before applying for a mortgage loan. While taking steps to improve your credit score is always a good thing, it is important to understand that your credit score is just one of many factors that lenders will take into consideration. In addition to looking at your credit report, lenders will also look at your bank statements, current income levels, and current spending habits to determine how financially stable you are. For this reason, it is important to focus on your overall financial health rather than simply on your credit score.
#3: There Are Time Limits Associated With Your Approval
While you may be quite anxious to start the process of being approved for a mortgage loan, you should know that any pre-approval or commitment to lend that you receive will come with an expiration date. This means that if you do not find a home you wish to buy and complete the purchase of this home before the approval expires, you will need to begin the entire application process again. For this reason, it is always best to wait until you are ready to actively begin searching for a home before you submit your application for a mortgage loan.
For more information on mortgage loans, contact a professional near you.