Getting Preapproved


Prequalification vs. Preapproval


Knowing how much you can afford before you start looking for a house can save you time and frustration. Getting a clear picture of your budget will ensure that you don’t fall in love with a house you can’t afford.

There are two ways you can find out how much you can afford: prequalification and preapproval.

prequalification involves the mortgage lender asking a few questions about your income, financial assets and any debt you may carry. The lender will also pull your credit report. You may receive a prequalification letter from the lender telling you approximately how much you may be able to borrow.

preapproval also involves the lender reviewing your financial records and credit history, but it goes a few steps further than a prequalification. When you get preapproved, you’ll also complete a mortgage application, and the lender will underwrite (or fact-check) the information you provide. Once you’re preapproved, you’ll receive a preapproval letter stating how much you can get approved for.

Does my preapproval letter expire?


Preapprovals generally expire after 90 days, though that can vary based on your type of loan. If you haven’t made an offer within 90 days of getting a preapproval letter, you should renew your PAL before making an offer on a house.


Why Preapproval Is a Better Choice


There are three significant advantages to getting preapproved instead of getting prequalified:

  • A preapproval is a better representation of how much you can expect to borrow. This helps you avoid shopping for homes outside your price range.
  • A preapproval letter shows your real estate agent that you’re a serious buyer who can afford the homes you’re viewing.
  • A preapproval letter proves to the seller that your offer is genuine. This could really make a difference if you’re competing against other buyers.

Since a preapproval is much stronger than a prequalification, some lenders skip prequalification entirely, giving clients a clearer idea of how much house they can afford from the start. Whether your lender does prequalifications, preapprovals or both, remember that your loan amount is subject to a formal underwriting review after your offer has been accepted by the seller.

How Your Preapproval Amount Is Determined


Mortgage lenders typically look at three criteria during preapproval: your savings, your income and your credit.

Your Savings


How much you have in savings is important because it shows your lender how much of a down payment you can afford. A down payment is the amount of your home’s purchase price you pay upfront. While the old way of thinking was that you needed to save up 20% of your home’s purchase price as a down payment, these days you may not need to have a lot of savings in the bank to afford a home. Conventional loans typically require a minimum 5% down payment, while FHA loans require as little as 3.5% down.

Your Income


Lenders review your income to ensure you can afford a monthly mortgage payment, and they’ll also check your debt-to-income (DTI) ratio to make sure that the amount of debt you have doesn’t offset your income too much.

Your Credit


In order to buy a home, it’s important to pay attention to your credit. Having good credit can help you qualify for a better interest rate because you’ve shown lenders and investors that you’re a responsible borrower. Some mortgage lenders require a minimum credit score in order to approve a loan.

Will getting preapproved affect my credit score?


Getting preapproved involves pulling your credit report, and this can lower your score by a few points. However, if multiple lenders check your credit over a short period of time, the credit bureaus will count these inquiries as a single credit pull, and your score will only be lowered once.


How to Choose Your Mortgage Company


Choosing a mortgage company is one of the most important decisions you’ll make during the home buying process – and it can affect your financial life long after closing. While some home buyers choose a loan company solely on who offers the lowest rates, it can really pay off to think about the bigger picture.

To get the mortgage that’s right for you, make sure you ask:

  • What are your rates and fees?
  • How much time on average do you take to close a purchase home loan?
  • What is your client satisfaction rating?
  • Will you service my loan after we close, or will you sell my loan to another company?
  • What’s your availability in case I have questions or need to get in touch?
  • Can we do this online or will I need a fax machine and stamps?

See how Divito Lending can provide a better way for you.

Get Pre approved Online with Fast Mortgage


Fast Mortgage℠ by Divito Lending lets you get approved in minutes – and do it all online. You can get a real, customizable mortgage solution based on your unique financial situation