How Long Before Buying Should I Get Pre-Approved for a HOME LOAN?
Being prepared to buy a house doesn’t just consist of obtaining a pre-approval letter from the bank. There is much more to the process of becoming a homeowner that you need to know. A question commonly asked is, “How long before looking at houses to buy, should the pre-approval process for a home loan begin?”
Before answering, let’s explore what is involved in getting pre-approved for a home loan in the first-place! A quick, 5-10 minute application will start you off where you will answer questions about
* prior residency and employment history for the most recent two years,
* current asset balances,
* years in school,
* real estate owned,
* current housing expense,
* personal identifying information (i.e., social security number, date of birth) to request a copy of your credit report from Trans Union, Equifax, and Experian (credit bureaus),
* answer 15 questions about prior history of judgments, bankruptcy filings, foreclosure/short sale/deed in lieu, defaulted federal debt, child support/alimony/separate maintenance, down payment, co-signing, citizenship, occupancy, prior property ownership (to identify first-time homebuyers),
* complete information for government monitoring (race, ethnicity, sex).
Once this application is submitted, I will request a copy of your credit report, review all of the information on the report and application and give you a call to go over any additional information needed or questions I may have at that time.
…But Won’t A Credit Inquiry Hurt My Score?
The lowest impact to your credit score is a mortgage inquiry and it is a necessary part of the home buying process. Do not let unnecessary concern prevent you from taking the next step!
The mortgage company wants to know your past and present payment history with your other creditors so they can determine if you are ready for a home loan and how much to lend to you and what terms.
Your credit report will be valid for 120 days from the initial credit check and there is a very likely chance that the bank will need to review another copy of your credit report before (and possibly after) closing. During the time from when you decide to buy a house until you close, be extra careful of opening any new debt or making changes to existing debt. Before you do anything, you should consult me to ensure you aren’t doing anything that can jeopardize your financing approval.
In most cases, it benefits the homebuyer the sooner they know what their credit scores are since most people do not regularly check what is reporting on their credit reports. When you apply for a mortgage and something pops up on your report that you were unaware of, it can unnecessarily complicate the approval process so the sooner you submit it, the better!
It is best to know ahead of time what you are pre-approved for before you go shopping for homes! It will also make your offer to a seller stronger because the seller will know the mortgage company has pre-approved you for the amount needed to buy their home.
A pre-approval will give you piece of mind to know you are one step closer to buying your dream home!