Buying a home comes with a lot of questions, especially when you are just getting started. One of the most confusing parts can be understanding the pre-approval process and how much money you will actually need to buy a home.
The good news is that you do not need to know everything before you begin. That is what we are here for.
Here are honest answers to five more common questions we hear from homebuyers.
What Is the Difference Between Pre-Qualified and Pre-Approved?
The terms pre-qualified and pre-approved are often used interchangeably, but they are not always the same thing.
A pre-qualification is generally an initial estimate of what you may be able to afford based on information you provide about your income, debts, assets, and credit.
A pre-approval typically goes a step further. Your mortgage professional reviews your credit, income, assets, debts, and supporting documentation to determine whether you meet the requirements of a particular loan program, subject to underwriting and other loan conditions.
At Village Mortgage, we believe in doing the work upfront.
When possible, we want to review your documentation before you start making offers. This can help identify potential issues early and give you and your real estate agent a clearer understanding of your financing options.
A pre-approval is not a final loan approval or a guarantee of financing, but it can help you shop for a home with more confidence and preparation.
How Long Does It Take to Get Pre-Approved?
The answer depends on your individual situation and how quickly we receive the information and documents needed to review your loan.
For many homebuyers with straightforward income and finances, the process can move fairly quickly once we have a completed application and the necessary documentation.
Other situations may take more time. For example, if you are self-employed, own multiple properties, receive commission or variable income, or have a more complicated credit history, additional documentation and review may be needed.
I always encourage homebuyers to get started before they find the perfect house.
Waiting until you are ready to make an offer can create unnecessary stress. Getting pre-approved early gives us time to review your situation, answer your questions, and work through any potential issues before you are under contract.
Does Getting Pre-Approved Hurt My Credit?
This is a question we hear all the time.
As part of the mortgage pre-approval process, a lender may need to review your credit. Depending on how the credit report is obtained, this may involve a hard credit inquiry, which can have a small and generally temporary impact on your credit score.
However, credit scoring models recognize that consumers may shop for a mortgage. Multiple mortgage-related credit inquiries made within a certain shopping period may be treated as a single inquiry for scoring purposes, depending on the credit scoring model being used.
The most important thing is not to let fear of a credit inquiry stop you from learning where you stand.
Reviewing your credit can help us identify potential issues, understand which loan programs may be available, and give you a clearer picture of your homebuying options.
If you have concerns about your credit, talk with us before applying. We are happy to explain the process and answer your questions.
What Documents Do I Need to Get Pre-Approved?
The documents needed can vary depending on your income, employment, assets, and the loan program.
In many situations, you may be asked to provide:
- Recent pay stubs
- W-2 forms
- Federal tax returns, when required
- Recent bank statements
- Documentation of other income you want considered
- Identification
- Information about your current debts and financial obligations
If you are self-employed, own rental properties, receive Social Security, retirement income, child support, alimony, commission, bonuses, or other types of income, additional documentation may be needed.
Please do not let the document list overwhelm you.
Our job is to explain exactly what we need and why we need it. We will help you through the process one step at a time.
How Much Money Do I Need for Closing Costs?
Closing costs vary from one home purchase to another.
The amount you need can depend on several factors, including:
- The purchase price
- Loan amount and loan program
- Interest rate and pricing selected
- Lender fees
- Title and settlement fees
- Appraisal costs
- Homeowners insurance
- Property taxes
- Prepaid interest
- Initial escrow account deposits
Because every transaction is different, there is no single percentage or dollar amount that applies to every homebuyer.
It is also important to understand that your down payment and closing costs are two different things.
Depending on the loan program and transaction, there may be options to help reduce the amount of money you need at closing. These could include seller concessions, lender credits, down payment assistance, or eligible grant programs.
That is why we like to look at the entire financial picture instead of simply telling someone how much they need for a down payment.
Our goal is to help you understand the estimated costs before you make an offer so there are fewer surprises along the way.
Getting Pre-Approved Is About More Than a Number
A good pre-approval should do more than tell you the maximum amount you may be able to borrow.
It should help you understand your estimated monthly payment, how much money you may need at closing, which loan programs may fit your situation, and what price range feels comfortable for you and your family.
At Village Mortgage, Inc., we believe education and preparation can make the homebuying process much easier.
As an independent mortgage broker, we work with a variety of wholesale lenders and loan programs. This gives us the ability to look at different options based on each homebuyer’s individual circumstances.
Most importantly, we take the time to answer your questions and explain the process in simple terms.
Whether you are planning to buy next month or simply wondering if homeownership may be possible in the future, you do not have to have everything figured out before reaching out.
Have questions about getting pre-approved? Contact Village Mortgage, Inc. We are happy to listen, answer your questions, and help you understand your options without pressure. 🏡
All loans are subject to credit approval. Programs and guidelines may change without notice. Equal Housing Lender. NMLS #91658.
A Home Loan specialist with over 25 years experience. She can help you find the best loan program that meets your needs.