Home Loan Preapproval

By: EconomyWatch Content   Date: 23 December 2009

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The best time to buy a home is when home prices and mortgage rates are at an all time low. The process of home buying can be made easier by obtaining a home loan pre-approval. A Pre-approval Commitment Letter is an underwritten approval for the requested loan. The letter specifies the maximum loan amount of money that you can borrow and also states the loan approval terms.

 

A pre-approval home loan will provide you an edge over others. You get a better idea of how much you can afford. A pre-approval also acts as a testimony of your willingness to buy a home. You can obtain a pre-approval online or over the phone.

Home Loan Pre-approval: How to Improve Your Chances of Getting a Pre-approval?

 

 

Being pre-approved states that your bank has already approved financing for the home you intend to buy. Even if you are a first-time homebuyer, you can follow these strategies to prepare yourself to obtain a pre-approval.

 

  • Request for a copy of credit report from any of the three credit reporting agencies, TransUnion, Equifax and Exparion. A pre-approval on a home loan requires you to have an above average credit score.

  • If the report indicates any outstanding bills, pay them off and send copies of the payment receipts to the credit reporting agencies.

  • By removing your debts, you can maintain a lower debt-to-income ratio, which your lender will need before approving the loan amount.

  • Do some comparison shopping by comparing interest rates, fees and terms on different home loan products offered are by various banks to get in touch with the best bank.

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Home Loan Pre-approval: Getting Pre-approval

 

To apply for a pre-approval, contact the loan officer of the chosen bank. The loan officer will ask you certain questions about your income, employment status and the down payment that you can afford. You will be required to provide the loan officer your Social Security Number, recent pay stubs, bank statements and monthly bills. Based on these, the loan officer will evaluate your worth and the ability to pay off the loan. S/he will also check your credit report to analyze your financial status. You will get a Good Faith Estimate and Truth in Lending Disclosure through mail.

 

The pre-approval letter will be directly mailed to you and a copy of the same will be faxed to your realtor.


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