- Getting pre-approved for a mortgage loan refers to completing the mortgage approval process before you begin bidding on properties. Qualifying for a mortgage involves meeting financial and credit requirements. And because a borrower's income and credit rating can fluctuate over the years, lenders must re-evaluate borrowers each time they want to purchase a new house. Once pre-approved for a mortgage loan, lenders issue a pre-approval letter that verifies a borrower's ability to acquire financing. Borrowers then present this letter to real estate agents and sellers when buying a new home.
- To acquire a pre-approval and receive a pre-approval letter from a mortgage lender, you'll have to forward several pieces of documentation to your broker or lender for review. Pre-approvals are different from pre-qualifications, in which lenders use stated information to determine if you meet the qualifications for a mortgage. With pre-approvals, lenders run credit reports and evaluate personal income. Documents to give lenders may include two paycheck stubs, previous year's tax return, bank statements and names of employers from the past 24 months.
- You can obtain a mortgage quote from more than one lender. This is advantageous because lenders factor in several variables when determining mortgage pre-approval and affordability. One mortgage lender can review your credit history and offer one interest rate, while a second mortgage lender can review the same credit history report and offer a rate that's slightly higher than the first lender. Getting rate quotes takes time, and you'll need to submit your information to a broker or at least two or three lenders. But in the end, you can save money on interest payments, which helps lower the mortgage payment.
- Mortgage pre-approval letters do have an expiration date, and this date can vary from lender to lender. Ask your lender about expiration dates, or read your letter to see if it includes an expiration date. If you don't purchase a new property by the pre-approval letter's expiration date, you'll have to re-apply for a mortgage approval and acquire a new letter. Pre-approval letters typically expire after 90 days.
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