Early on in the house hunting process, Chris and I learned that when we found the house of our dreams, we probably wouldn’t be the only ones dreaming of it. Even in a slow real estate market, there are usually multiple offers placed on a great house. I can’t imagine a lot of things worse than falling in love with a home and then losing out to another bidder, so we wanted to do everything we could to make ourselves competitive buyers. Enter the mortgage pre-approval.
A pre-approval is really just a letter from a bank or lending institution saying that, if we applied, we would be qualified for a mortgage loan large enough to afford the house we’re bidding on. It’s not a loan application, so it’s not at all binding on either side. Meaning, the bank is not guaranteeing that they’ll actually give us the loan at the rate quoted, and we don’t actually have to follow through with borrowing any money.
The process itself was really easy. I called a number listed on our bank’s website (we like our bank a lot, but you can get qualified by any mortgage lender you want) and was connected to a loan officer who asked TONS of questions. To start this process, I would definitely have the W2s of any loan signers on hand for all the relevant information. The loan officer needed to know Chris’ and my social security numbers, where we work (including addresses and phone numbers), what we earn, where we’ve lived in the last 5 years and how much we’ve paid to live there, what our expected home price would be, how much money we were interested in putting down and what county we were looking in. They also need permission to run our credit reports.
I’m assuming all the personal information is a way of assessing our credit-worthiness, while all the home information is what helps determine the interest rate. It was a lot of questions, but it only took about 20 minutes once I had all the answers in front of me.
After I spoke to the loan officer on the phone, she told me to sit tight for about 20 minutes until she could email me the formal letter. Sure enough, less than half an hour later, I had a mortgage pre-approval letter in my inbox! That’s it. From here, we can show the letter to our realtor to prove that we are serious about the houses we’re interested in seeing. More importantly, we can present the letter to potential home sellers when we place a bit, so they know we likely won’t have trouble getting the financing needed to purchase their home! We’re hoping this will put us ahead of the crowd and give us a fighting shot at our dream home. Now we just have to find the thing.