5 Things You Need to Know About Mortgage Preapproval

Whether you’re in need of some expanded space or you’re shifting from a rental to a home you can fully call your own, securing financing by way of a home loan is step one. But before you make assumptions about what can you afford, make sure you tackle the preapproval process first.

Here are five things you should keep in mind when getting your mortgage preapproval amount.

Buying Power

The best part about getting preapproved for financing before you start the home search? You know your spending power—that magic number that gives you permission to put in an offer with confidence. The most important thing to remember, though, is that your preapproval amount won’t necessarily equate exactly to what you can afford. Take stock of your monthly household budget, and consider what your monthly mortgage payment would look like. Base the amount you’re willing to offer at the bargaining table off of that reconsidered number.

Plus, when you finance through Levo, you might walk away with no closing costs! Ask our team about our no-closing-cost mortgage options.

Necessary Documents

Another critical part of the home loan prequalification process is having the right documents handy—whether you’re applying in a branch or online. These will include verification of your income, such as W-2s and real estate income statements, as well as a documented breakdown of your assets (i.e., bank statements, retirement statements, etc.) and debts (i.e., student loan statements, auto loan balances, etc.).

Preparations

To maximize the prequalification amount you might receive (or to simply get approved in the first place), there are steps you can take to make your finances more squeaky-clean before applying. For example, pay down high-interest debts as best you can before submitting an application. This can positively affect your debt-to-income ratio and increase the amount you might be allotted by the financial institution. Another consideration is steady income—it’s not typically a good idea to apply for a home loan, for example, if you’ve recently changed employment or are between jobs. This can have a negative impact on what a lender might be willing to offer.

Downpayment

One particularly useful part of getting a mortgage preapproval before starting the searching process is that it gives you a better sense of how much a downpayment might impact your overall repayment plan. Talk with your lender about how different sizes of downpayments might impact both your interest rate and your monthly payment. This could signal to you that putting more money down in the near-term might be worth it in the long run.

Speaking of downpayments, when you finance through Levo, you could enjoy no downpayment during your build on construction loans. Ask our team!

Printed Proof

Another useful aspect of having a preapproval in tow once you get to the bargaining table is that you have printed proof of your ability to close on a given home. Once your lender prequalifies you, you’ll receive a letter outlining the details of your mortgage preapproval. Provide this documentation to your real estate agent so that it can be used as a potential “plus” in your pro column if a seller is weighing multiple buyers’ offers.

Ready to see what your spending power looks like? A lender who knows the local market is a great first step. Talk to Levo about getting preapproved for a home loan.