When buying a home, getting mortgage pre-approval in Texas is one of the most important things you can do. It doesn’t matter which city your future home will be in, Houston, Austin, San Antonio, Dallas, or Fort Worth, having a pre-approval will help your buying process. Many experts claim that buyers who aren’t pre-approved are at a disadvantage when it comes to purchasing a home.
If you want to streamline the home-buying process and position yourself as a serious buyer, you need to get pre-approved for a mortgage.
In this article, we’ll discuss everything you need to know about getting pre-approved and why it is so important. Getting pre-approved can significantly improve your chances of finding your dream home. It’s important to understand how it can work for you.
You’re House Hunting in Houston: What is a Mortgage Pre-Approval?
First and foremost, it’s important to understand that getting pre-approved does not guarantee you’ll get a loan for that amount. When a lender grants you a letter of pre-approval, they are certifying that they have reviewed your financial situation and they believe you are a qualified buyer.
Pre-approvals make it easier to purchase a home because sellers only want to deal with serious buyers. Your pre-approval letter shows sellers that you have the financial backing to purchase their home.
Once you are pre-approved, you will also have a clear idea of your budget. This will help you set realistic expectations and narrow your search.
While a pre-approval isn’t a 100% guarantee of a loan, getting pre-approved offers many benefits and few drawbacks. It’s worth taking the time to do.
Pre-Approval vs. Prequalification: What’s the Difference?
Buyers often get these two confused. There’s a big difference between being prequalified and being pre-approved.
Being pre-approved is more official, and it takes more time. When you apply for prequalification, your lender estimate how much you can borrow based on the numbers you provided. You do not have to submit supporting documentation.
Pre-approval is more serious. In order to be pre-approved, your lender has to take a deep dive into your financial situation. Your income, assets, employment, and other factors will help your lender determine whether or not they can pre-approve you for a loan.
Sellers love seeing letters of pre-approval because they know that pre-approved buyers have already been vetted out by lenders. Prequalification just doesn’t carry that much weight with sellers. Pre-approval is proof that you’re serious and qualified to purchase a home.
Why Mortgage Pre-Approval In Texas Is So Important
Getting a mortgage pre-approval in Texas is important. It helps you establish rapport with your lender, encourages sellers to work with you, and provides you with a budget.
When you go through the pre-approval process, you’ll get to know your lender. When it’s time to buy a home, they’ll already have your information on file.
The letter of pre-approval, will show figures for the purchase price, interest rate, loan amount, down payment amount, and other important information. It’s very important to understand that this letter is non-binding.
You are not obligated to use the lender that pre-approved you, and they are not obligated to loan you the money.
The importance of shopping with your pre-approval letter in hand can not be stressed enough. Sellers don’t want to waste their time on window shoppers.
Being able to prove that you have the financial chops to purchase a home will prevent you from being ignored by sellers. You’ll also be able to narrow your search and only look at homes within your price range. When you are pre-approved, it saves everyone time.
Most importantly, getting pre-approved will give you peace of mind that you are financially ready to purchase a home. Don’t be discouraged if you aren’t pre-approved, or if you are given a budget that’s less than what you expected.
You may need to take more time to improve your financial situation so you can buy with confidence and be able to make your mortgage payments.
Does Pre-Approval Damage Your Credit Score?
There are so many benefits of getting pre-approved for a home loan, but many buyers don’t get pre-approved because they fear it will lower their credit score. When your lender goes to pre-approve you, they will run a credit check.
While credit checks can certainly lower your credit score, it will only go down by a few points.
Having a high credit score makes it easier to get approved for a loan. If one or two points can take your score from average to bad, you probably need to work on raising your score before trying to secure a home loan.
Yes, pre-approvals can knock a few points off your score, but your score should be high enough to withstand the slight decrease before you ever set foot in a lender’s office.
What Do You Need to Be Pre-Approved?
The pre-approval process doesn’t just scratch the surface of your finances. When you step into your lender’s office to be pre-approved, they will leave no stone unturned when they look into your identity, employment, assets, and income.
Pre-approval is an in-depth process, so you’ll need to bring quite a few documents with you to your meeting.
To verify your identity, you’ll need to bring your driver’s license, social security card, and green card if you aren’t a United States citizen. You’ll also have to answer questions about your employment and authorize your lender to run a credit check while you’re there.
For income verification, you’ll have to provide your last month of pay stubs, W-2 forms from the last two years, verification of additional income, and income tax returns from the past two years.
To verify your assets, your lender will ask to see your bank statements to prove you have enough for your down payment. You’ll also need to bring statements for any investment accounts you have.
As you can see, getting pre-approved for a mortgage is not easy, but it’s a serious step you can take that will put the wind in your sails as you move forward in the home-buying process. For every minute you spend gathering up documents, know the effort sellers won’t skim past your request to view their homes.
Pre-approval is your fast pass to buying a home you can love and afford for years to come.
When Should You Get a Mortgage Pre-Approval?
Experts say that getting pre-approved is one of the first steps you should take when buying a home. However, there are a lot of pre-requisites for home-buying that you need to complete before you ever think about applying for pre-qualification.
First, you should be completely debt-free when you start the home-buying process. Pay off car payments and student loans before you take on a mortgage. You should also have a solid emergency fund in your savings account and a 10-20% down payment saved.
Lenders want to work with buyers who have good credit, low debt-to-income ratios, and stable sources of income. If you can’t meet these standards, your pre approval may be turned down.
How Long Do Pre-Approvals Last?
Once you’ve been pre-approved, your letter of pre-approval is only valid for two or three months. After being pre-approved, you should begin shopping for a shopping immediately. If you don’t find a home before the preapproval lapses, you’ll have to go through the approval process again.
Working with a real estate agent can make finding the home of your dreams quick and easy. They have access to listings and information you may not be aware of. You may want to enlist the help of a trusted real estate agent after you’ve been pre-approved.
Final Thoughts on Pre-Approvals in Texas
Whether you’re looking for a home in Houston, Austin, Dallas, San Antonio or Fort Worth, getting mortgage pre-approval in Texas will make it easier for you to quickly find what you’re looking for.
While the pre-approval process itself can be time-consuming, most experts agree that it’s a step that shouldn’t be skipped. Once you’re financially healthy and stable, having your lender grant you a letter of pre-approval will make shopping for a home easier.
Again, it’s important to understand that a pre-approval does not guarantee that you will get the loan. However, if you haven’t hidden anything, like a tax lien or a divorce, your chances of securing a home loan for the amount you were pre-approved for are very high.
Getting mortgage pre-approval in Texas benefits you and everyone you work with during the home-buying process.
Get financially healthy, be honest with your lender, and you’ll be on your way to purchasing the home of your dreams.