Put simply, you must provide most of the information you would for a full-blown mortgage application, with the exception of details on the home you want to buy. That’s because the whole point is to pre-approve a loan amount before you’ve settled on a property. Once you do, you provide details on the property so the lender can order an appraisal and title search, which looks through government records for details on all loans and leans against the property.
The appraisal and title search, along with some legal fees and perhaps an application fee, are the big expenses in a mortgage application. Since they’re not part of the pre-approval, the pre-approval application should be very inexpensive, even free. Wells Fargo, for example, charges no fee for the pre-approval, and it’s valid for 120 days once granted.
Keep in mind that a pre-approval, though much stronger than a pre-qualification, is not a guarantee you will get the loan. The title search could derail the process, or the lender may find that the home is not worth enough to justify a loan of a given size.
A loan could also be denied at the last minute if your credit rating slips, which could happen if you have late payments on debts, run up credit card bills, take on a car loan or other debt, or even if you apply for a new credit card.
To start the process, use the BankingMyWay search tool to find some attractive mortgages. Then phone the lenders to ask about the pre-approval process.
Find out how long it will take, what it will cost and how long the pre-approval will remain valid. In the end, you should have a document to provide the seller showing you’re a good candidate for a loan.
—For the best rates on loans, bank accounts and credit cards, enter your ZIP code at BankingMyWay.com.