Browsing through enticing online property listings may ignite your imagination, but the true journey of homebuying commences when you reach out to a lender and obtain preapproval for a mortgage. While not binding, mortgage preapproval provides valuable insights into the amount a lender is willing to lend you and the type of mortgage you may qualify for. Once this vital step is completed, the lender will furnish you with a preapproval letter.

A similar estimate of your borrowing capacity can be obtained through pre-qualification, which is an informal process relying on self-reported financial information. In contrast, preapproval is backed by substantiated financial documentation, which is why a preapproval letter carries significant weight. Pre-qualification can serve as a useful tool to establish a realistic budget, while a preapproval letter signals to real estate agents and home sellers that you possess the means to secure financing and are prepared to make a home purchase.

Once you’ve tracked down all the necessary information, use Sword Mortgages preapproval portal on our website.

Important things to remember:

• To obtain preapproval, it is necessary to gather documentation such as Social Security numbers, proof of income, banking information, and tax forms. Make use of a preapproval documentation checklist to ensure you have all the necessary paperwork.
• Before applying, it’s important to ensure your finances are in order. This may involve addressing any inaccuracies on your credit report or settling outstanding debts. By doing so, you’ll demonstrate to lenders that you have the means to afford a mortgage.
• Pre-qualification offers a relaxed and informal approach to assess your home buying readiness, while preapproval entails a more comprehensive process tailored for motivated borrowers who are fully prepared to make a purchase.
• Your preapproval will likely expire within the next three months, or even sooner.

5 Essential Steps to Obtain Preapproval for a Home Loan

1. Obtain your complimentary credit score. It is beneficial to know your standing before approaching a lender. To qualify for a mortgage, a credit score of at least 620 is recommended, while a higher score will secure you better rates. Ideally, a credit score of 740 or above will grant you access to the most favorable mortgage rates. Before embarking on your homebuying journey, strive to maximize your score. However, if necessary, you can also explore lenders who specialize in assisting borrowers with lower scores.
2. Review your credit history. Obtain copies of your credit reports and address any inaccuracies promptly. Should you come across any overdue accounts, collaborate with creditors to resolve them before submitting any applications.
3. Evaluate your debt-to-income ratio. Your debt-to-income ratio, also known as DTI, is the percentage of your gross monthly income allocated to debt payments. This includes credit cards, student loans, and car loans. Lenders generally prefer a DTI of 36% or lower, which includes the potential mortgage payment. However, in certain cases, it may be slightly higher. If your monthly debts are excessively burdensome, you may need to address this by refinancing, considering an income-based repayment plan, or aggressively paying down your debt before pursuing a mortgage.
4. Collect essential financial and personal details. This includes Social Security numbers, current addresses, employment information for both you and your co-borrower (if applicable). Additionally, gather bank statements, investment account information, and proof of income. To obtain a mortgage preapproval letter, you will need documents such as your W-2 tax form, 1099s (if applicable), and recent pay stubs. Most lenders prefer a minimum of two years of continuous employment, although exceptions can be made. Self-employed individuals will likely be asked to provide two years of income tax returns. If your down payment is sourced from a gift or asset sale, ensure you have documentation to substantiate the transaction.

5. Reach out to Sword Mortgage – Click here to get started

Preapproval and pre-qualification are not interchangeable terms

When you’re uncertain about your financial readiness to purchase a home, pre-qualification is a beneficial initial step. It involves an informal assessment of your credit, debt, income, and assets, allowing the lender to estimate your eligibility for a mortgage and the potential borrowing amount. If you receive a positive response during pre-qualification, the next step is preapproval. This involves a thorough evaluation of your credit report, income, assets, and debts. If you feel confident about your credit and financial readiness to buy a home and are eager to start house hunting, you can bypass the pre-qualification step and proceed directly to preapproval.

When should I get preapproved for a mortgage?

Mortgage preapproval is an enticing offer from a lender, providing you with a specific loan amount and terms. However, it’s important to note that this offer has an expiration date, typically around 30 to 90 days. Understanding the fine print and the validity period of your preapproval letter is crucial. When you’re genuinely ready to embark on your house-hunting journey and ready to make an offer, that’s the ideal time to apply for preapproval.

It’s vital to remember that preapproval does not guarantee loan approval, and there’s still a possibility of mortgage denial. To ensure you’re not overpaying for a property, a home appraisal must be conducted before finalizing the loan. Additionally, it’s important to be aware that any changes in your financial situation between the preapproval and closing stages may affect the lender’s offer.

That’s why it’s crucial to avoid any financial decisions after preapproval that might make you appear risky to lenders. Some actions to avoid after being preapproved for a mortgage include applying for new credit, making significant purchases, or missing loan and credit card payments. By adhering to these guidelines, you can maintain a strong financial profile and increase your chances of obtaining a mortgage.

Contact Sword Mortgage To Learn More About Your Options

Call (770) 757-5750 or complete our online form to speak with a loan expert at Sword Mortgage to get help navigating your options and find a loan that fits your needs today.