Getting pre-approved for a home loan doesn’t have to be complicated. We’re here to answer common questions to help get you started.

You’ve decided to buy a house, but before you start going to open houses, you’ll want to make sure that your dreams of home buying have a solid foundation. Making sure you can get a mortgage loan is an important part of the home buying process. We understand that getting pre-approved for a loan can be confusing, so let’s take a look at some common questions on how to get pre-approved for a home loan in Richmond, VA.

πŸ€” Why should I get pre-qualified for a home loan?

If you’re thinking of buying a home, but you haven’t decided if that’s the right plan for your current budget, it’s a good idea to begin the process by getting pre-qualified for a mortgage loan. Getting pre-qualified involves a simple financial check process that you can do with your bank or finance company. In most cases, you can do this step over the phone.

The mortgage company does an initial credit check and looks at the information you provide on income. This information helps them determine your debt-to-asset ratio. They give you a ballpark idea of how much you can borrow and details on suggested loan terms.

Another positive aspect of a home loan pre-qualification is that it can show you where to make improvements to get a higher loan amount or improve the terms of your future mortgage loan. Because the pre-qualification process looks at your FICO score and installment loan history, you can use the home loan feedback to significantly improve your financial standing over the course of a year.

loan pre-approval concept - Woman on phone

πŸ“‹ What’s the difference between pre-approval and pre-qualification?

Keep in mind that getting pre-approved and getting pre-qualified are two different things. A pre-qualification is an initial look at your finances with a ballpark idea for the loan, and this step does not leave an inquiry on your credit report. When you get pre-approved for a home loan in Richmond, you’re getting a more definite answer on your loan inquiry, and this credit check does show up on your report.

A pre-qualification letter is sent by the lender to indicate the approximate home loan approval amount based on a quick look at your credit score and the income you report. A pre-approval letter indicates that the lender is willing to offer you a set amount of money towards your home purchase. This letter includes the terms of the loan.

Having the pre-approval letter does not mean you have the loan, but it does show your real estate agent and home sellers that you are serious about the purchase of a home. The pre-approval puts power behind your plan to buy a house.

πŸ“² Contact The Wilson Group

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❓ What does the pre-approval process look like?

While pre-qualification is a quick process, getting an actual home loan pre-approval can take from a few days to a couple of weeks to complete. The application requires information from your credit report, income verification, and a history of payments or installments. Look at it as a physical exam on your financial health.

Keep in mind that the amount suggested during your pre-qualification may differ from the amount you’re given as part of your pre-approval. Because an in-depth financial investigation is involved in the pre-approval that includes your full credit and payment history, these two amounts can be different.

Aside from the home loan amount available for financing, you’ll also have a better idea of the interest rate you will be charged on the loan. In some cases, you can lock in a specific rate. Getting pre-approved for a mortgage gives you a chance to move quickly when you find the perfect home. When you make an offer, it won’t be contingent on obtaining financing, which can save you valuable time.

loan pre-approval concept - credit history

πŸ’΅ How can I improve my pre-approval chances?

If the results of your pre-qualification application raise a few red flags, you can take a step back and work on improving your credit score and debt-to-asset ratio. Be sure to sign up for a credit reporting service that lets you easily review your credit report.

You can raise your credit score and improve your report findings by making payments on installments loans on time and in full. During this time of improvement, do not open new lines of credit or close inactive credit accounts. Stay away from maxing out your credit cards. A good rule of thumb is to use one-third or less of your available credit.

If your credit score is on the lower side, you may still be able to get a pre-approval on a home mortgage loan. In the cases where this is possible, you’ll typically pay a higher interest rate with increased time on the actual loan.

loan pre-approval concept - credit score

🏦 Get Pre-Qualified Today!

πŸ—“οΈ How long does a home loan pre-approval last?

Getting pre-approved for a home loan early in the home buying process is a great idea. Having this pre-approval letter adds to your buying power and shows that you’re serious about buying a home. If you find yourself in a bidding war with another buyer, this pre-approval can give you an edge over someone without one.

A pre-approval is contingent on the stability of your financial situation. For this reason, it’s a good idea to refrain from making any major purchases with installment loans while you’re under the umbrella of the pre-approval letter. Buying a car at this time can significantly change your debt-to-asset ratio.

Pre-approval for a home mortgage is generally valid for 60 to 90 days. The pre-approval can be updated through a re-verification of documents once that initial time passes. Be sure to read your pre-approval letter thoroughly and ask questions.

loan pre-approval concept - approval letter

πŸ’² How much home can I afford?

Your pre-approved home loan is a statement of how much your lender is willing to let you borrow for a home purchase. Don’t make the mistake of thinking that this is how much home you can afford. In fact, many first time home buyers, especially if they’re moving from an apartment into a house, find themselves “house poor” once they’ve moved in.

There are several things to consider when determining how much home you can afford. Use a mortgage calculator to get a foundational idea. Remember to factor in HOA dues, taxes, home maintenance, utilities, and homeowners insurance.

While lenders provide loans with various percentages of cash down on the purchase, planning for a down payment of around 20% of the cost of the home is a smart move. The less you put down in cash on a property, the higher your monthly mortgage payment.

How to Get Pre-Approved for a Home Loan in Richmond VA
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How to Get Pre-Approved for a Home Loan in Richmond VA
Getting pre-approved for a home loan doesn't have to be complicated. We're here to answer common questions to help get you started.
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The Wilson Group
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