Step 1: Pre-Approval
The mortgage pre-approval (also called a pre-qualification or “pre-qual”) is done “pre” (i.e. before) shopping for a home!
There are multiple loan options available, each with its own set of requirements, fees, closing costs, points, and interest rates. Your chosen mortgage professional will help you evaluate the most suitable mortgage programs for you. If you qualify for more than one type of loan, you should get pre-approved separately for each.
At this stage your lender is looking at your ability to repay a loan. Lenders assess candidates on a case by case basis by reviewing factors, such as your current employment, employment history, income, assets, debts, credit reports, credit score, and how you plan to use the property.
Once your lender has evaluated your financial situation, they will let you know how much they are willing to lend you, (i.e. your home shopping fund), and you will receive a pre-approval letter to accompany any offer you make on a home. This letter is important as it lets the Seller know that you have the ability to obtain funds for the amount you are offering them.