When you get pre-approved by Better Mortgage, you'll receive an official document called a pre-approval letter.
It states how much you’ll be able to borrow for the purchase of a home based on the information you provided to us. Your final loan amount will be verified later through the full underwriting process, but this letter is still a valuable tool that has many benefits.
Definition of a pre-approval letter
A pre-approval letter is a document from a lender that is based on the financial information you gave them. This letter does not make a promise. Instead, it informs you that you can obtain a specific amount of money as a loan under certain conditions. It's how a lender evaluates your income and financial situation to start to determine if you qualify for a mortgage loan.
Example letter
Here’s what a pre-approval letter from Better Mortgage looks like. Our process is 100% digital and takes as little as three minutes. At the end of process, you’ll see your maximumestimated loan amount based on specific loan terms.
You can change your letter to show a specific loan amount. This allows you negotiate, without showing the seller the maximum that you can afford.
Why get pre-approved?
A pre-approval letter offers several advantages.
You can provide it to your agent, who will include it along with your offer when you’ve found the right home. It tells the seller you’ve already looked into financing and that you’re highly likely to be able to complete the purchase if they accept your offer. They can also be helpful by giving you a more accurate picture of your appropriate price range.
Simplifies home shopping
One of the major advantages of going through this process is that it simplifies your home shopping process. This letter gives you a specific price range to work with, allowing you to focus on properties within your budget. This narrows down your home search, saving you time and effort in looking at homes that are beyond your means.Knowing that you have already been pre-approved for a specific loan amount gives you more confidence when putting an offer on a home. Plus, sellers are more likely to consider offers from homebuyers who have already been vetted, knowing that financing is less likely to fall through.
Enhances your offer
This letter also enhances the strength of your offer when competing with other buyers. Sellers view pre-approved homebuyers as more reliable and credible, as they demonstrate financial readiness to purchase a home. Having a letter shows serious intent, which makes your offer competitive in the market. This may increase the likelihood of it getting accepted.With this process, lenders have already checked your finances, credit score, and history, reducing paperwork and underwriting needed at closing.
Identifies and resolves issues
Lenders carefully review your credit report during pre-approval. They do this to identify and address any credit problems. They want you to resolve these problems before you buy a home.This gives you time to resolve any issues upfront, which limits hurdles later in the home buying process.
How to get pre-approved
The pre-approval process involves understanding your credit score, providing income verification, and submitting necessary documentation. The timeline for pre-approval varies, but with the right preparation, it can be a straightforward process. This process involves several key steps, including selecting a suitable mortgage lender, gathering essential personal and financial documents, and undergoing a credit check.
Step 1: Select a suitable mortgage lender
The first step in getting pre-approved is selecting a mortgage lender that meets your specific needs. It's essential to research and compare lenders in terms of rates, services, and reputation in the mortgage industry.
Look for lenders who offer pre-approval with a soft credit pull, as hard inquiries can temporarily lower your credit score. It's also important to choose a lender who provides transparent information about the process, including the specific documentation required and the timeline of the pre-approval process.
Step 2: Gather essential personal and financial documents
Once you have selected a mortgage lender, the next step is to gather the necessary personal and financial documents. Lenders need proof of income and employment history, like tax returns, pay stubs, and financial statements. It's important to have accurate, current, and organized documentation to make the pre-approval process easier. By having these documents prepared, you can expedite the pre-approval process and demonstrate financial readiness to lenders.
Step 3: Importance of Credit Check in Pre-Approval
One of the key components of pre-approval is the credit check. Lenders conduct a hard inquiry, which involves assessing your credit report, credit score, and credit history. This information plays a significant role in determining your reliability, interest rate, and loan amount.
A good credit score improves your chances of getting better mortgage rates. Lenders view individuals with higher scores as less risky. Understanding how credit checks work can assist you in preparing for pre-approval. It is important to ensure the accuracy of your credit history and address any credit issues promptly.
Pre-Approval FAQs
Yes! Getting pre-approved online is a quick and easy way to start securing a loan. At Better Mortgage, you can get your pre-approval done in as little as 3 minutes, all online, with no impact to your credit score.
Does pre-approval guarantee a mortgage loan
While pre-approval is a crucial step in the mortgage process, it doesn't guarantee a mortgage loan. Pre-approval means a lender has checked your finances and thinks you're a good fit for a loan, but it's not a sure thing. Final approval considers factors like property appraisal, thorough underwriting, and any changes in your finances.It's essential to provide accurate and up-to-date information during the application process to enhance the likelihood of securing the mortgage. Keep in mind that pre-approval offers valuable insights into your eligibility, but the final approval is contingent on the successful completion of all necessary steps in the mortgage application process.
What if I get denied?
If your pre-approval is denied, it's not the end of your homeownership aspirations. It provides an opportunity to understand what you need to work on in order to qualify. This may involve paying down existing debts, boosting your credit score, or exploring alternative mortgage options.
Pre-Approval Letters from Better Mortgage
Better.com's pre-approval letters show you're ready to buy a home with clarity, reliability, and speed. You can get your letter in as little as 3 minutes with no impact to your credit score. Start your pre-approval today.
