Getting a loan for a home purchase can get complicated and sometimes difficult if all necessary steps are not taken. You might consider a pre-approved home loan as a better route when looking for a home loan.
A pre-approval makes it a lot easier and safer to get this loan. Although this does not mean formal approval, they permit you to shop around a house.
Before negotiating with a buyer, most people selling their homes request a home loan pre-approval letter. This article will discuss what it is and how to get your house loan pre-approved.
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What is a Pre-approved Home Loan?
A pre-approved home loan is a document to states you can get approval for a house loan or mortgage.
They do this by collecting the borrower’s credit status in a form to ascertain whether he is qualified for the loan. It can also be called a pre-approved mortgage loan.
The lender gets access to the borrower’s account details and runs a check to know if it’s worth it or not; this is called a credit check.
Another important aspect the lender runs a check on is the location of the borrower and other personal reviews.
After all necessary checks, a pre-approval letter is issued to the borrower and a lender, which can last sixty to ninety days (60-90).
You will not be caught unaware because the expiry date will be specified in the letter of pre-approval you receive from the lender.
This kind of loan is repayment-safe since the lender already has an evaluated knowledge of the borrower’s payment power and plan.
Since we now know what a pre-approved home loan is, let us consider how to get a pre-approved home loan.
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How To Get A Pre-approved Home Loan
The borrower and lender must follow due process to get a pre-approved home loan. The following are processes on how to get a pre-approved home loan.
1. Have specific knowledge of the Terms of The Pre-approved Home Loan.
This is the first step any borrower must follow, regardless of the type of loan. Good knowledge of the terms and conditions of the pre-approved home loan, as this will fast-track the loan process.
It is also important to weigh other options and lenders available to make the right choice.
2. Get Informed about the Home You Want to Buy
It is important to have information on the home address when it was built, the cot, and the area to fill out the right information.
3. Provide your personal Information on The Form
In the pre-approval form, you have to provide full personal details such as full name, home of residency, town, date of birth, marital status at the moment, spouse information, if any, place of birth, and many others.
There are specific spaces for this information on the form, known as the borrower’s information.
4. Provide Accurate Employment details
To ascertain your repayment power, there is a space in the pre-approval form for employment information.
Give full details of your employment status, such as place of work, previous employment history, a position occupied, and more.
5. Provide Full Details of Your Income and Expenditure
Your income and expenditure are important information that must be included in the pre-approval form.
This information includes your yearly income, yearly expenditure, allowances, payment sources, cash at hand, cash at the bank, child support provisions, and lots more.
Remember, a credit check will be done; this information is needed for a proper check.
6. A Legal Declaration
You must sign a legal declaration that all information in the pre-approval form is accurate. These declarations are binding by law and must be included.
Documents Involved in Pre-approved Home Loans
The following are necessary documents you must provide to get a pre-approved home loan:
- A valid bank statement, not more than 60 days.
- W-2 form.
- K-1 form if you are self-employed
- Income statement
- Declaration of Asset
- A Valid ID or Driver’s license
- Gift letter
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Final Thought
A pre-approved home loan is a safe and easy way of obtaining loans to buy properties.
Depending on the lender, getting the approval letter and the loan can take a short period. While for some, it may take a longer period.
Either way, it is also important to run a check on the lender to choose which to deal with.
If you follow the procedures listed in this article, you will get a pre-approved home loan easily.
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