Qualifying for a home loan can be a daunting experience, even to borrowers and home buyers who have previously walked through the mortgage process. The good news is that mortgage applicants don’t have to walk this financial path alone. Mortgage specialists can guide new and experienced borrowers to success when going through the pre-approval process to qualify for an FHA loan or conventional financing options.
What does the preapproval process look like? Why is it important? One of the best mortgage companies Texas offers is here to help.
Start With Budgeting
When you’ve decided to buy a house, you might hear that it’s important to get preapproved for your home loan. Most sellers prioritize buyers with a preapproval letter. So, going through this process with reputable mortgage lenders helps position you for better success when putting in an offer on your dream home!
The first step to mortgage approval is to create a reasonable, well-thought-out budget. Borrowers can then meet with a mortgage consultant to begin the mortgage pre-approval process with a budget in hand. The best loan officers help homebuyers stay within their budget with the best financing available.
Your lender can help you determine which types of mortgages may be the best fit for your loan scenario. Mortgage options include:
- Conventional Loans (FNMA or FHLMC, etc.)
- FHA Loans
- USDA Loans
- Jumbo Mortgages
- Texas VA Mortgage Loans
Your lender can also help you find applicable buyer incentive programs that can help lower your down payment.
The Preapproval Process Begins
For borrowers in the Lone Star State, the best mortgage companies Texas offers can give you a preapproval letter after completing the qualification process. This letter is an approving-nod from the bank's underwriters regarding your ability to qualify for a mortgage loan. Loan pre-approvals typically include specific loan parameters like a maximum loan amount or monthly payment limit, an interest rate maximum, minimum down payment requirements, and other particular requirements.
The best Texas mortgage lenders issue pre-approval letters that are typically valid for 60 to 90 days. If the pre-approval letter expires, borrowers can submit updated paperwork for re-evaluation.
What Lenders Consider for Mortgage Preapproval
An underwriter needs to answer three fundamental underwriting questions to make a well-informed credit decision during the preapproval process. Lenders evaluate these “creditworthy” characteristics based on financial documents and other information.
1. What Is the Borrower's Financial Capacity?
Can the borrower repay the mortgage as agreed? This question is answered by reviewing the borrower’s work history evidenced by pay stubs, W2s or tax returns, etc.
2. Will the Borrower Repay the Mortgage As Agreed?
This is determined by evaluating the borrower's credit score and profile. One's credit history is a reasonably accurate indicator of how a borrower will make future monthly payments. However, credit score requirements for conventional or FHA loans may differ from lender to lender.
3. If the Borrower Defaults, Is There Sufficient Collateral?
Texas mortgage lenders must be able to recover the funds from a home loan if a borrower can’t (or won’t) repay the loan. Therefore, when considering preapproval, loan officers will look for different types of collateral or request a cosigner as a backup when a homebuyer defaults on the loan.
The Pre-approval Letter Explained
After reviewing the documents for this review process, the pre-approval letter is awarded based on the borrower's income, assets, and credit profile, as long as the borrower's creditworthiness meets established lending criteria.
The pre-approval letter strengthens a buyer's offer to purchase because the seller is confident that the impending sale will not disrupt the buyer's inability to secure financing. This additional assurance likely makes an offer more attractive than other offers without submitted pre-approval letters.
The Mortgage Application Process Begins
However, it’s important to remember that a preapproval letter does not guarantee that you have a loan! It’s simply a sign of good faith that you’ve done the work to qualify when a seller accepts your offer. When you find a home and your offer has been accepted, the actual mortgage process begins.
At this time, borrowers submit the executed contract of sale, proof of required assets and earnest deposit money, the fee for the subject property's appraisal, and any required credit document updates. The mortgage process can take one to two months, depending on the market, your mortgage company, and the borrower's ability to promptly comply with the requested documentation.
Start the Preapproval Process With Texas United Mortgage!
A pre-approval letter is a smart and effective way to demonstrate to sellers your qualifications to borrow money as a potential buyer. If you’re looking to buy a home soon, starting the preapproval process early in your search can help you understand your budget and be prepared to place an offer when the right home comes along! Texas United Mortgage helps first-time buyers and experienced borrowers navigate the preapproval process. Whether you’re looking for an FHA-approved lender or other types of conventional mortgages, reach out soon to learn how we can help!
Learn how to budget for a home from the experts! Download a free copy of “The Definitive Home Buying Cost Worksheet.”