How to Get Mortgage Loan Pre-Approval

By obtaining a mortgage loan pre-approval, you insure yourself against wasted time, effort and even money. If you wait to find out if you can obtain the desired loan after you have already signed a contract for a home, you could meet with disappointment. Find out, upfront, the funds that a lender will guarantee for your mortgage, so you can know what is affordable and what is off-limits.

Instructions

1. Get a free copy of your credit reports from a reputable service. Look over your reports for any errors. Confirm that you have a history of on-time payments throughout your report.

2. Get good-faith estimates from three separate sources -- two mortgage brokers and one bank. Compare the terms of the mortgage loan offers before applying for a pre-approval. Call each source, stating that you want to buy a house that costs a certain amount; state the amount you have available for down payment and the condition of your credit. State whether you want a 15- or a 30-year fixed rate or adjustable-rate mortgage and whether or not you can deal with a pre-payment penalty. Ask each source to send you a good-faith estimate by fax or email.

3. Review the estimates and choose the lender with which you would like to apply for your loan pre-approval. Contact the lender and inform it of your decision. Gather all required paperwork, such as pay stubs from at least the last 30 days, tax returns for the last year (2 years, if you are self-employed) and statements of your liquid asset accounts, such as checking and savings, from the last 2 months. If you apply for pre-approval with someone else, such as your spouse, provide paperwork for each party.

4. Complete any application paperwork that the lender or broker requires. Sign a release to allow the lender or broker to check your credit status.

5. Satisfy any conditions that the lender requires prior to final approval. When an underwriting department pre-approves you for a mortgage loan, it submits a currently dated document that states the amount of the pre-approved mortgage loan and contains the lender's or broker's contact information, so your real-estate agent can verify its validity.

Tips & Warnings

• When you shop for the best rates, a lender or a broker may ask your permission to check your credit. If you do not want multiple credit pulls on your record, inform them that you are only shopping right now and that you understand that any information they provide is not a guarantee. Allow the credit check after you have decided on a lender.

• A mortgage loan pre-qualification is not the same as a mortgage loan pre-approval. A pre-qualification is based only on unverified information that you provide to a lender. Compare loan fees when looking at the good-faith estimates. Some lenders or brokers may include unnecessary or inflated fees in this part of the estimate.

References

• "It's Not About Rate: The Right Way to Get a Mortgage"; Richard Cohen; 2007
• "Mortgage Rip-Offs and Money Savers: An Industry Insider Explains How to Save Thousands on Your Mortgage or Refinance"; Carolyn Warren; 2007
• Broker Outpost Mortgage Reference Library; What Should a Preapproval Letter Contain?; Prakash Bhakta

Resources

• AnnualCreditReport.com