Getting pre-approved is the most effective way to determine whether you can afford to take out a mortgage in West Jordan and other communities in Utah. It involves presenting essential documents, such as bank statements and tax returns, to your lender and securing a conditioning loan commitment from the other party.
Skipping pre-approval can be a waste of time because you cannot narrow your property options without knowing how much you can borrow to begin with. This procedure is helpful and necessary, but it is imperative to understand its nature before stepping into your lender’s office. With that in mind, here are the most important things that you need to know about a mortgage pre-approval:
It Will Affect Your Credit Score
No lender can come up with a specific loan amount without checking your credit report first. The other party has to make a “hard inquiry” to access and analyze your information. Pulling your scores can ding your credit to some extent. The effect of a single hard inquiry can be negligible, but seeking pre-approval from many lenders can affect your credit score more noticeably.
It Has an Expiration Date
Usually, a mortgage pre-approval is only good for 60 to 90 days. It cannot be valid for an extended period because the industry landscape does not stay the same and your creditworthiness can change quickly.
Creditworthiness has a significant role in making your loan requests accepted. The term is rather self-explanatory; lenders are defining how deserving you are of credit. More precisely, the word creditworthiness describes your chances of defaulting on a loan commitment.
How frequently you pay your statements on time is the most significant factor that influences your creditworthiness. Recently delayed payments and other misconducts can make you less creditworthy. As a result, you will have a hard time requesting new credit cards and loans.
In addition, the amount of debt that you are carrying affects your creditworthiness. For example, having high credit card balances can make it more challenging to have your requests approved. With that in mind, you should keep your credit card balances below 30 percent of the credit limit and pay your loan balances on time.
With a lower credit score, you can be approved for some credit cards. On the other hand, you can have a difficult time being approved for a mortgage. If you want to improve your credit score, you have to prove to bankers or lenders that you are not at risk of defaulting on new credit commitments.
It Is Not Final
A pre-approval does not guarantee anything. The loan amount and interest rate given to you can increase if your credentials become less attractive since your pre-approval. The advantage is that you can negotiate for a better deal if your situation improves.
In the end, mortgage pre-approval is nothing but a way to get a vote of confidence from your prospective lender, but no deal is binding unless signed. However, since it is more thorough than pre-qualification, it provides more accurate and reliable insights when making property-purchase decisions.