Wondering how long it takes for mortgage pre-qualification and pre-approval? We discuss the factors to dictate the pace and how you can make it faster.
Meet Sam.
He had been trying to move into a new house for a long time. He found his preferred property after months. The house was worth $400,000, which he assumed was fair, and did not negotiate to bring the price down.
When Sam went to the lenders to apply for the mortgage loan, he bumped into a dead-end. How? Sam realized that at that time, he was only eligible for $250,000. So, all that effort that Sam made when shortlisting property has probably gone to waste.
Before Sam improved his financial position, the property was already sold.
Now, put yourselves in Sam’s shoes and how differently you could have approached the situation. How about going for a mortgage pre-qualification and mortgage pre-approval?
Got questions like, what are mortgage pre-qualification and mortgage pre-approval? How much time will they take? And how can it save you from suffering the same fate as Sam?
Stick around till the end for answers.
If you want a firefighter to put out the uncertainty of, “Am I eligible for a loan or not?” mortgage pre-qualification is your cup of tea. This is where lenders want to know about various financial positions for different reasons. Some of them are:
To clear these doubts, lenders would want to know things like your identification, income, debt, credit history, employment verification, and more.
One advantage of the pre-qualification process is that lenders don’t verify your claims. The result of whether you are eligible for a mortgage and the estimated loan amount is based on the information you provide. So make sure you respond correctly.
Since the information is not yet verified, the results from mortgage pre-qualification may not give you a much more accurate estimate. But after the pre-qualification process, you will surely understand the prerequisites of obtaining a loan when it’s time to buy the property.
The last but vital factor is the credit score. In the pre-qualification process, the lender accesses your credit report as a soft inquiry because it will be for non-lending purposes. That means it will not cause your credit score to go down.
We have talked about how the mortgage pre-qualification process does not include information verification. That can result in not getting a very accurate loan amount estimate. But when you are looking for more surety with your loan amount, mortgage pre-approval is the way to go.
The pre-approval process includes lenders verifying the claims you made. Some of the requirements of mortgage pre-approval include:
The lenders will want to confirm your identity and ensure they are giving the amount to the right person. Social security numbers, driving licenses, or passports can be used for identification verification.
How many sources of income do you have? What is your employment history? How much is your monthly income? All this information is vital for lenders to make sure you have the finances available for loan repayment.
To serve this purpose, your lender may want to see your bank statement, tax returns, pay stubs, W-2 forms, and more.
Your lenders want to see your record of managing and repaying debts. Were you good at it? Or do you have a history of missed payments, home foreclosures, or checks bouncing? That is what the lenders learn by reviewing your credit history.
As we mentioned, accessing your credit report for mortgage pre-qualification requires a soft inquiry. Things are different in the pre-qualification process.
Since the lenders want to see the gaps in your credit report, it requires a hard inquiry, which may temporarily decrease your credit score.
Knowing your gross income is just the first part of what lenders may want to know. In addition, the lenders would also want to know what amount of money from your income, you have to pay back as debt. The lenders might be interested in knowing your debt-to-income (DTI) ratio.
Ideally, having a DTI ratio under 45% eases your road toward mortgage pre-approval.
Mortgage pre-qualification can be completed in significantly less time, as compared to mortgage pre-approval. That’s because the pre-qualification process does not involve verifying claims by reviewing evidence.
On average, the pre-qualification process can take a couple of days to complete. In most situations, you don’t even need physical interaction with the lender. The entire pre-qualification process can take place online.
Sometimes, the thing which can slow down a pre-approval process is having a complicated financial situation. When this happens, the lenders might ask for additional information.
After you are done with mortgage pre-qualification, it is now time to get a more accurate loan amount. This calls for you to start the pre-approval process, which can be more time-consuming. That’s because the lender would want to evaluate the documents for verification.
Like mortgage pre-qualification, there isn’t a fixed timeline for the pre-approval process. But generally, most pre-approval processes take five days to one week.
A major factor that can impact the length of the mortgage pre-approval is the property you are eying. Some lenders restrict the type of properties you can purchase. That can cause a delay in the pre-approval process, as the lender might want to know about your preferred property type.
Pro Tip
One way to speed up the pre-approval process is to organize your documents in advance. That way, you won’t keep the lender waiting for long.
Mortgage pre-qualification and mortgage pre-approval can breathe new life into your home-buying process. Now that you know what you need to do to improve your chances of obtaining the loan, you can move to the next step, shopping for the right property.
You can start your journey at HAR.com, your destination to find your dream home. Doing this after going through the pre-qualification and pre-approval process will save you from having a fate like Sam faced.
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