Before starting home shopping, it is best to apply for a mortgage in advance. A pre-approval letter will make your offer stronger when you find the home of your dreams. It is also one of the fastest steps in the mortgage process.
If you’re ready to buy a home, check out Benzinga’s guide to get pre-approved.
Question: How long does it take for a mortgage to be approved?
Answer: A pre-approval takes 1 to 10 business days, depending on the lender and how extensive the pre-approval process is. Some lenders will pre-approve you after a credit check based on the personal information you provide. Others want to see a full application and all of your required documentation.
What do you need to pre-approve a mortgage?
Since each lender takes their own approach to pre-approval, the exact documents you need will vary from lender to lender. The best approach is to gather all the documents you need get a mortgage and keep them organized and ready to send to potential lenders.
It may take a while, but organizing it properly will make the process less stressful in the long run. Here’s a checklist of documents you can collect:
- Pay slips for the past month
- W-2’s for the past 2 years
- Tax returns for the past 2 years
- Bank statements for the past 2 months
- Documentation of other sources of income (child support, marital support, etc.)
- Documentation of the source of your deposit
- Investment fund or savings account statements showing 2 months of ownership
- For gift funds, ask for a letter from the person or organization donating the money. The lender may also need documentation from the giver showing ownership of the funds, such as 2-month bank statements.
- ID, such as government issued ID
- Your social security number
- Documentation of your name change if it is recent (court documents, marriage certificate or divorce order)
- Certificate of Completion for a Home Buyers Education Class, if you expect to apply for a loan that requires one
Keep in mind that in some situations you may need even more documentation. For example, those who are own boss in addition to the standard documents, you may want to collect 1 to 2 years of bank statements, 2 years of business returns and your most recent profit and loss statement. This is because you want to show your real income to lenders. Your tax returns don’t always reflect your actual income because of your business deductions.
Mortgage Pre-Approval Process
While each lender has a different pre-approval process, the pre-approval process generally involves the following steps:
- Contact or visit the websites of potential lenders. Look at the loan options and interest rates. Keep in mind that the rate you are offered may vary based on your credit score and other factors.
- Decide which lender or lenders you want to approach for pre-approval. Keep in mind that you are not making a commitment at this point and neither will the lender. The lender says he will likely approve you once he verifies your information. You can still decide to work with another lender.
- Complete the lender’s pre-approval application and upload or send any necessary documents. Many lenders offer an online pre-approval application, which helps speed things up. Ask questions if there is anything in the application that you are unsure about.
- Receive and view your pre-approval letter. If you are approved for more than you plan to spend, ask the lender to adjust the pre-approval letter. You don’t want to give home sellers a prior letter of approval showing that you can afford more than you offer. You want to provide a pre-approval that matches your offer. Also, have your broker review the letter to make sure it provides enough information to sellers.
What if you are denied pre-approval for a mortgage?
It is possible that a lender will refuse you at the pre-approval stage of the mortgage. But it’s important not to give up at this point. With time and effort, you can position yourself to qualify for a mortgage.
The first step is to talk to the lender to find out why you were denied. Lenders will send a letter if they’ve used your credit score to decline your pre-approval. The letter states what credit score it used to make its decision and how to get a free copy of your credit report. You are entitled to a free copy when the information is used to reject your application.
Once you have your credit report ready, check it for errors. The Consumer Financial Protection Bureau (CFPB) offers a checklist to make sure you’re looking at all the details. If you discover errors, you must correct them in writing by contacting the credit rating agency and quoting the source of the error.
For example, if a company claims you paid late and you have proof that you didn’t, write a letter explaining the mistake. Include a copy (not the original) of your receipt, such as a bank statement or an approved check.
You will also want to look for areas that you can improve. For example, if you have a high balance on your credit card, you may want to pay it up to 30% or less of your credit limit. Let’s say you have a card with a limit of $ 1,200. If you can, pay it up to $ 400 or less.
If you’re not sure where to start, consider working with a HUD-approved housing advisor. These advisers can review your financial situation and help you take concrete steps so that you can get a mortgage in advance. You can find a counselor by calling 800-569-4287 or by visiting the CFPB website.
Best Mortgage Lenders for Pre-Approval Process
1. Best Overall: Quicken Loans®
Faster loans offers an easy online pre-approval process via Rocket Mortgage® by Quicken Loans®. It has award-winning customer service and has been ranked at the top of customer satisfaction by JD Power for 10 consecutive years.
You can easily chat or call and talk to an expert if you have any questions about getting pre-approval. Quicken Loans offers extensive educational materials on its website, so it’s a great resource for one new home buyer.
2. Best for Veterans: Veterans United
Veterans United gets rave reviews from its borrowers – for good reason. It provides clear information about the pre-approval process. Representatives are available around the clock to ensure you can get information when you need it.
You can start the process from the Veterans United website or by phone. Veterans United is a top VA lender, which means it has the expertise to walk you through the entire VA loan process.
3. Best for Self-Employed Borrowers: US Financing
US funding offers fast pre-approval and a digital mortgage process. In addition to standard loan options such as conventional and FHA loans, American Financing also offers a bank statement loan program. This can be an excellent choice if you are self-employed and sometimes struggle to find a mortgage despite having a reliable income.
Call, chat, or text a mortgage adviser for more information or start the pre-approval process. American Financing receives excellent reviews from borrowers.
4. Best for an Online Mortgage Process: Better.com
Better.com offers one of the fastest pre-approvals around – 3 minutes for a base preference and 20 minutes for a verified pre-approval. Better offers a complete online mortgage experience. It also doesn’t charge any lender fees, which can bring significant savings. His experts are available at all times if you have any questions along the way.
5. Best for FHA loans: loanDepot
loanDepot uses technology to speed up the pre-approval process. The experts are experienced in FHA loans, and you can work with a loan officer in person if you live near a local branch.
Start an application online, by phone or in person. loanDepot also has educational resources to help you better understand the mortgage process so you can make informed decisions along the way.
Do I need to be pre-approved?
Getting pre-approved will help you know exactly what you qualify for before starting home shopping. It also helps you make stronger offers, increasing your chances of buying your dream home.
For more information on the mortgage process, as well as information on home startup programs and more, visit our mortgage guide.