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What is a mortgage pre approval?

Generally speaking, a mortgage pre-approval is a formal preliminary letter issued to a home applicant by a lending institution acknowledging that such a borrower would qualify for a particular loan amount under that lender's guidelines.

Pre-approval letters are recommended and deemed necessary before shopping for a home as they prove your ability to purchase a home and provide a rough idea of how much house you can afford. Most lenders issue pre-approval letters that are good for 60 to 90 days. This gives you an ample time to shop and put an offer for your dream home

Before providing a mortgage pre-approval letter, lenders will actually need to determine if you qualify for a mortgage. Typically, lenders ask for your estimated income, assets, debts, down payment amount and whether you have a good credit to assess your current financial situation. Based on provided information, lenders are able to establish whether you meet certain mortgage loan requirements and give you a maximum loan amount you'd qualify for, pending verification of provided financial information. This process is called prequalifying for a mortgage loan.

Written pre-approval letters are provided by lenders after the prequalification process is complete. Banks request and review your income documents, debts, assets and credit history to determine how much you can comfortably pay for a mortgage loan every month, which will then determine how much they would be willing to lend you. Based on the documented income, your middle FICO score and earnest money deposit, banks then and only then are able to issue the formal and written pre-approval letter outlining mortgage loan program, rate and terms you are preapproved for. You can then shop for a house that fits approved loan amount/value. This process is what's called getting pre-approved for a mortgage home loan. Getting pre-approved for a mortgage loan is not a guarantee and it does not obligate the issuing bank in any way, however a mortgage loan preapproval can give you and give sellers confidence that you can get approved for a mortgage the kinds of homes you want to buy. That's why you final approvals are required once offer is accepted.

After you've made an offer to buy a house and your offer is accepted, you would still need to go back to that same bank to obtain a final mortgage approval. Final approval is issued by lenders once a mortgage banker aka mortgage loan officer submits a completed Uniform Residential Loan Application (1003), your mortgage application, purchase agreement and the property you're buying has gone through a full underwriting process, and a decision has been rendered by an underwriter to ensure your loan fits investors guidelines. That is, final loan approvals and bank's commitments are offered by lenders upon verification of all application information, satisfying all underwriting requirement and conditions, and providing an acceptable appraisal and title report. Final approvals include all loan terms, rate lock, investor's loan number, approved loan amount and all prior to document and funding conditions and requirements to close your mortgage loan.

* Arbor Financial Group's Online Pre-Approval Process may grant you a conditional pre-approval letter. Actual loan approval will be warranted once full home loan application has been submitted and underwritten. Contact one of our agents for more assistance. © 2017 Arbor Financial Group. All rights are reserved.
All Arbor's mortgage professionals are registered on the Nationwide Mortgage Licensing System & Registry (NMLS), which promotes uniformity and transparency throughout the residential real estate industry. NMLS #0185041
NMLS Consumer Access

Consumer Handbook on Adjustable-Rate Mortgages (CHARM Booklet)
Subject to credit approval. Certain restrictions and limitations apply.
Equal Housing Opportunity Lender Equal Housing Lender
We do business in accordance with the Federal Fair Housing Law and the Equal Credit Opportunity Act. Loans made are considered without regard to race, color, religion, sex, national origin, marital status or age of any persons, or because a person received income from a public assistance program, or has in good faith exercised any right under the consumer credit protection act.