It can be hard to shop for a home without knowing how much you can afford. Mortgage preapproval lets you shop smarter and make stronger offers. Let’s look at what it means to get preapproved and how to get started.
What Is A Mortgage Preapproval?
Preapproval is the process of determining how much money you can borrow to buy a home. To preapprove you, lenders look at your income, assets and credit score to determine what loans you may be able to get approved for, how much you can borrow and what your interest rate might be.
Preapproval Vs. Prequalification
Preapproval and prequalification are both ways of understanding how much you’ll be able to get approved for. There are some slight differences between these two processes, though some lenders use these terms interchangeably.
A prequalification is like a preapproval, but it may not be as accurate. With a prequalification, you won’t have to provide as much information about your finances, and your lender won’t pull your credit.
Without your credit report, your lender can only give you estimates – which means the approval amount, loan program and interest rate might change slightly as the lender gets more information. Because a prequalification is just an initial review of your finances, you usually don’t need to supply documentation (like bank statements and pay stubs) during this stage.
Preapprovals are a bit more in-depth than prequalifications. When you get preapproved, you may be required to provide information or documents like bank statements and pay stubs to prove your income and the funds you’re using to get the loan. A preapproval will also require a hard credit check so your lender can get your credit score and see how much other debt you have.
Preapproval Vs. Approval
A preapproval is helpful when you’re shopping for a home, but you’ll need to get a full approval once you find your home. For your lender, this process includes making sure the property details check out.
Here are a few property details your lender will need to approve:
- The appraisal value. Your lender will order an appraisal of the home to make sure you’re not paying more for the home than it’s actually worth. An appraisal that comes back lower than the purchase price could pose problems for your loan.
- The title. Your lender will work with a title company to confirm who owns the property and make sure there are no claims or liens against it.
- The home’s condition. Some loans require that the property meets certain standards before the loan can close. For instance, if you’re purchasing the home with an FHA loan, things like cracked windows, missing handrails or a roof that’s in poor condition could keep the loan from closing.
What Is A Mortgage Preapproval Letter?
When you get preapproved, you usually get a preapproval letter. There are a few reasons the preapproval letter is important. First, real estate agents typically want to see your preapproval letter before they show you houses. This ensures they don’t waste time showing you homes outside your budget. Second, the preapproval letter is something you can share with the home’s seller when you make an offer. It shows that you won’t have problems getting financed for the amount you’re offering.
Why Should I Get Preapproved?
If a preapproval doesn’t get you a loan right away, why get one? Preapprovals have a number of benefits:
- It’s easier to shop. Many real estate agents require you to get preapproved before you shop for a home. Preapprovals make the house hunting process easier for both you and your real estate agent.
- It makes your offer stronger. If you’re shopping in a competitive housing market, a preapproval can be crucial to getting your offer accepted. Sellers aren’t just looking for the highest offer. They’re also looking for offers that aren’t likely to fall through. A preapproval tells buyers that you can get financed for the amount you’ve offered.
- It gives you time to sort out issues. There are reasons both buyers and sellers may need to get to closing fast. Getting preapproved means you’re getting the bulk of the mortgage process done upfront. That way, once you’ve had an offer accepted, you can just focus on getting ready for your move.
How To Get Preapproved For A Mortgage
If you’re looking to get preapproved for a mortgage, Rocket Mortgage® can help. Rocket Mortgage® offers a couple of different approval options:
- Our Prequalified Approval is the fastest way to get approved with Rocket Mortgage®. Simply apply online and allow us to check your credit. You won’t be required to provide any documents, but you should come prepared with information about your income and assets. You’ll have the option to sync your application with your bank accounts so we’ll know exactly how much you have available for your down payment and closing costs.
- Our Verified Approval℠ is even stronger than a Prequalified Approval. To get one, you’ll need to apply with Rocket Mortgage® and then contact a Home Loan Expert. We’ll do a full verification of your income, assets and credit so sellers can be certain you won’t run into financing issues. Our Verified Approval℠ even comes with a guarantee: If you don’t close based on our review, we’ll pay you $1,000.1
To get started with either approval option, apply now on Rocket Mortgage®. Here’s how it works:
Step 1: Apply And Check Your Credit
Our online application asks you a series of questions to evaluate your eligibility for a home loan. You’ll give us information about yourself, the home you want to buy, your income and your assets. From there, we’ll check your credit so we can offer you accurate mortgage solutions.
Step 2: See And Customize Your Mortgage Solutions
See your recommended mortgage solutions and adjust your numbers to fit your budget. This is where you’ll see how much we can approve you for, as well as recommended loan types, down payments, monthly payments and interest rates.
Step 3: Get Your Approval Letter
Once you’ve chosen your mortgage option, you can see if you’re approved for it. From there, we’ll give you a Prequalified Approval Letter that you can use to shop for homes. For an even stronger approval, you can contact a Home Loan Expert to get a Verified Approval℠.
A preapproval is a great first step toward buying a home. Once your financial information is verified, you'll have a clear idea of how much home you can afford. Getting preapproved before you start your house hunt benefits everyone involved. To get started, apply online now with Rocket Mortgage® by Quicken Loans®.
1Participation in the Verified Approval program is based on an underwriter’s comprehensive analysis of your credit, income, employment status, debt, property, insurance, appraisal and a satisfactory title report/search. If new information materially changes the underwriting decision resulting in a denial of your credit request, if the loan fails to close for a reason outside of Quicken Loans’ control, or if you no longer want to proceed with the loan, your participation in the program will be discontinued. If your eligibility in the program does not change and your mortgage loan does not close, you will receive $1,000. This offer does not apply to new purchase loans submitted to Quicken Loans through a mortgage broker. Additional conditions or exclusions may apply.
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