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There are many benefits to applying for a preapproved mortgage when going property hunting.
A preapproved loan provides an individual with a concrete idea about how much money they can borrow from a lender. A lender will conduct an in-depth financial review to find out the borrower's financial history. This process requires the borrower to fill out a mortgage application even before a property has been selected. Realtors view those with preapproved mortgages as being in a stronger position to buy a property as they already have the backing of a lender. As a result, they are in a superior position to negotiate a property deal than those who have a prequalified mortgage as prequalified mortgages are not legally binding.
Here are 4 tips about getting a preapproved mortgage:
Shop for Options
When looking for a preapproved loan, talk to at least two or three different mortgage lenders. This is because different lenders have different deals, so you will be able to discover the mortgage package that best suits your needs.
Make sure to choose a reputable lender to avoid any situations where the lender simply cannot deliver the loan or the company has bad business practices. If you are buying a property in an area that you are unfamiliar with, ask a realtor for recommendations. You may also wish to visit the Better Business Bureau's website at www.bbb.org to learn about the mortgage lenders' business reputation.
Prepare Your Financial Documents
Upon selecting your mortgage lender, lender should inform you what the financial documents you need to prepare for the in-depth financial check that it needs to perform. This is so that they can verify the borrowers' income, assets, and credit to ensure that the borrowers can make the necessary monthly mortgage repayments. Financial documents that may be required for this procedure include:
Federal tax returns
W2 or 1099 statements
Recent pay slips
Any investment income documents
Watch the Deadline
All preapproval letters have due by dates. These dates vary between lenders, but in general, these letters are only valid for 3 months. This means if you still have not found the property that is right for you, you will need to contact your lender to get an extension so that you can re-validate the preapproved mortgage letter.
Watch Your Credit Score
It is possible for a loan inquiry to decrease your credit score. However, this excludes any inquiries to your pre-existing student loan, automobile loan, or property loan inquiries that you have made at least one month prior. However, the good news is that if you have made multiple inquiries for new loans, it will only be calculated as one loan inquiry in your credit score in the following months thereafter.
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