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What exactly is pre-approval?While pre-approval may sound like a guarantee that the loan will be made, buyers should not be confused in that regard. A pre-approval of any home loan is simply a statement that there is a strong likelihood that the loan will be approved, and thus serves as a strong indication to the home seller that they are dealing with a serious buyer who has the means to complete the purchase. That fact alone can often make the difference between a long drawn-out period of negotiation and a quickly realized offer to purchase and acceptance.
So how does it work?There is, of course, a process involved in obtaining pre-approval for any home loan, so any buyer who seeks one should be prepared to provide a number of important disclosures to the lender. Banks generally require between 3 and 6 months of pay statements, or equivalent bank documentation indicating that you have the income you state that you have. In addition, you will also need to provide documentation as to the nature and extent of your expenses so that the lender can evaluate your ability to repay the loan that you are seeking.
Of course, a credit check will be performed so that the lender can identify other instances of credit attached to your name, while also checking to ensure that you are not on any blacklist. On the basis of all of that information, the lender will make the decision as to how credit worthy you appear to be, and choose to issue pre-approval if you are found to be capable of repayment. Obviously, your best chances of being provided with pre-approval are in cases where you have both a high income and a strong credit record. Those two factors have an additional benefit as well, and it is one that is often overlooked by borrowers: good credit and higher income levels often place you in a position of strength when you attempt to negotiate the best interest rates for your loan.
How to improve your chances in getting approval?Unfortunately, there are few things that you can do on the spur of the moment to improve your chances of being pre-approved for any mortgage loan. In instances of bad credit or low income, the process for improving your chances will take years to complete. For that reason, every individual should pay close attention to the decisions that affect personal credit from an early age, so that good credit will be available later in life when it is needed.
You may need to also check for the reliability of the lender that you intend to apply for loan. It is best for you to search online for the reviews of the mortgage lenders to see if they are good or bad company so that you may avoid in getting scammed.