Pre-Approved Mortgage

Very few people are lucky enough to get pre-approved mortgage in these times of credit uncertainty. So if you have pre-qualified for a mortgage loan, I insist that you use it to the best of your ability, right away. A lot of people tend to confuse between pre-qualified and pre-approved mortgage. So here's an article which will help you understand the two things.

Pre-Qualified vs Pre-Approved Mortgage

The difference isn't too big and only a matter of that one extra step. A person is said to have pre-qualified for a mortgage when he clears a particular criteria set by the Federal Housing Authority (FHA). When such a person who has pre-qualified for a mortgage goes and gets his financial status approved by the required authority, then he is said to be pre-approved for a loan. So, as you can see, the difference between pre-qualified and pre-approved mortgage is only about getting the approval from the mortgage companies that your credit is just perfect. So let us now see the first step i.e. pre-approval, the pre-qualification.

Pre-Qualifying for a Mortgage

• Steady employment history is a must in order to pre-qualify for a mortgage. You need to have worked with the same employer for at least 2 years.
• The second criterion for pre-qualifying for a loan is having a steady or increasing income for the past two years. Your income is important because that helps determine the amount of the loan you pre-qualify for.
• Your credit report again needs to show a good performance on your past credit. There should not be more than 2 thirty-day late payments on any forms of debt over the past 2 years. Getting your mortgage pre-approved with bad credit is not really possible.
• People who have been through bankruptcy can rejoice as by showing steady improvements over the past 2 years on your credit score, you become eligible for pre-approved mortgage.
• People who have been through foreclosure too can pre-qualify for a mortgage, 3 years post the completion of the foreclosure process.
• Finally, the last criterion for the pre-qualification process is the average monthly income. The amount paid towards mortgage payments is typically 30% of the monthly income.

Pre-Approved Mortgage

It goes, like I mentioned before, one step ahead from pre-qualification. What you need to do here is to take a copy of all the financial documents that prove that your financial position is good enough, as decided by the pre-qualification requirements above and attach them to the application form. You send the application to the concerned authority and then wait for their reply. They might ask you to come for an interview later and discuss the documents with you to check if everything is in order. If everything is in order, then your loan is said to be pre-approved.

Now what is the big deal about pre-approval anyway? Pre-approval means that you instantly qualify for a loan and cannot be refused the amount you qualify for under any circumstances, should you clear all the requirement criteria. If the amount you pre-qualify for is too less in your estimation, you will need to apply for a loan in the normal way.

Getting a pre-approval on your mortgage is a real boon for home buyers who have been good with their credit and have managed their finances well. So they can go on and buy the house of their dreams with the help of this system.