Once you've done your homework and selected your lender, you can expect them to be by your side every step of the way, beginning with getting pre-approved before you begin looking for homes.
What is a pre-approval letter and how do you get one?
The pre-approval letter from your lender tells you the maximum amount you are qualified to borrow. Getting a pre-approval letter is not a loan guarantee, it simply states how much your lender is willing to lend you—pending forthcoming details, such as the value of the home and the specifics of your loan. This pre-approval allows you to look for a home with greater confidence and demonstrates to the seller that you are a serious buyer.
Pre-approval letters have an expiration date so be sure to ask your lender how long your letter will remain valid.
To get pre-approved, you'll complete your lender's loan application, providing them with important information about your credit, debt, work history, down payment, and residential history. This information helps your lender evaluate your 4 Cs to determine how much you may be qualified to borrow:
- Capacity: Your current and future ability to make your payments
- Capital or cash reserves: The money, savings and investments you have that can be sold quickly for cash
- Collateral: The home, or type of home, that you would like to purchase
- Credit: Your history of paying bills and other debts on time
If your lender determines you qualify for a loan, you'll receive a pre-approval in writing that outlines the maximum amount you can borrow. Remember, it's a maximum, and not necessarily the amount you should borrow. You'll want to stay within your budget and comfort level.
Understanding the mortgage loan process
Once you find your home, your lender will shepherd you through the lending process – from finding the right loan to completing your loan application.
Tools & Resources
Calculator: How Much Can You Borrow?
Learn how much money you might be able to borrow.
Video: Shopping for a Mortgage
Don’t leave money on the table—it’s in your best interest to compare mortgages.
CreditSmart: Module 11: Becoming a Homeowner
Get practical information on how to prepare to obtain a mortgage and own a home.