Preapproval is a smart thing to do for a mortgage to buy a house in Oakville. A mortgage preapproval is a document from a lender that tells you how much you can borrow to buy a house. It depicts your qualification for a type of mortgage and the interest rate. The documents state the approval of mortgage application based on borrower’s income and provided credit information. As per the Oakville mortgage broker: You need to provide the same information for mortgage preapproval that you need for a mortgage loan application.
Difference between Mortgage Preapproval and Prequalification
You will likely confront a process, mortgage prequalification, while looking for a mortgage. Mortgage prequalification evaluates how much the borrower is eligible to borrow. Nonetheless, it doesn’t include details, such as interest rates, fees, etc. Conversely, mortgage preapproval is a much more formal process and requires the completion of a detailed mortgage application. Besides, it requires the submission of supporting documents and a thorough examination of credit reports and scores. Some real state agents prefer seeing a mortgage prequalification; it doesn’t carry much weight like mortgage preapproval.
Requirements for a Mortgage Preapproval
Mortgage preapproval requires the submission of a mortgage application, and it’s a comprehensive process. Here are items you need to submit with your mortgage application:
Personal Details:
A proof of your identity, including a copy of a passport or a driver’s license and a social security number.
Credit Information:
It’s important to check your credit score and report at least six months before the process. It will help you to avoid surprises and clear your credit report inaccuracies.
Income Information:
You will need to provide pay stubs, bank statements, and tax returns for the past few years. It will help you document your income. Plus, the lenders average the yearly incomes on tax returns for self-employed individuals’ previous two-year tax returns.
Assets and Debts:
Mortage lenders want to see the resources to make sure borrowers can cover their loan down payment and make payments. Thus, you will need to show assets, including savings, investments, and personal property. You may also need to show your debts, although they show up on credit reports. Requirements for down payments and other assets will vary as per the loan type.
Moreover, you will need to pay an application fee of several hundred dollars for mortgage preapproval. Lenders can generate a preapproval letter within the day of submission. However, lenders require additional verification for a part of the application for self-employed individuals.
Longlastingness of Mortage Preapproval
As per the Oakville mortgage broker, mortgage preapproval lasts for a limited period, that is, 60 to 90 days. The lending terms in a preapproval document have no guarantee; sometimes, the document includes a rate lock-in. If the prevailing interest rate rises or your credit score drops between preapproval, you will be given a lower loan amount than the one mentioned in the letter with a higher interest rate. You will need to render updated versions of the information on the finalization of a mortgage from the lender
Mortgage Preapproval and Its Effects on Your Credit
A credit check for a mortgage preapproval is the same as a mortgage. A credit check is a hard inquiry on a credit report that can lower your credit score by a few points. Moreover, credit scoring systems treat several applications to shop for a new loan as a single event. Nonetheless, it will treat them as single applications if you make them within a few weeks.
Importance of Mortgage Preapproval
A mortgage preapproval plays an important part in the homebuying process. The preapproval document depicts your ability to move forward with a sale fast. It also confirms your means and intentions to purchase a new home.
Conclusion
Preapproval is the right thing to do for a mortgage to buy a house in Oakville. According to the Oakville mortgage broker: You need to provide the same information for mortgage preapproval that you need for a mortgage loan application. Mortgage prequalification isn’t the same as mortgage preapproval. Here are items you need to submit with your mortgage application for mortgage preapproval:
- Personal Details
- Credit Information
- Income Information
- Assets and Debts
You will also need to pay an application fee of several hundred dollars for mortgage preapproval. Furthermore, mortgage preapproval lasts for 60 to 90 days and plays a significant part in the homebuying process.
Patrick Romann (https://www.patrickromann.ca/) is an independent Mortgage Agent in Oakville dedicated to helping you build and execute the best mortgage plan with mortgage services.