The best time to get pre-approved for a mortgage is at least one year before you decide to buy. As a homebuyer, prior approvals are for your benefit, so it's never too early to get one. Getting pre-approved early is an advantage because a third of mortgage applications contain an error. lenders will not proceed with approval until the “dispute” label is removed, either because the agency rules in your favor or because it rules in favor of your creditor.
The big difference is that, unlike a mortgage application, prior approval doesn't apply to a specific property. For many lenders, the start of the month is when they try to get the most applications, while the middle of the month is the time to gather all the supporting documents and prepare the loans for final approval. If you need a mortgage to complete the sale, you will attach your pre-approval letter to your offer to show that you have been examined by a lender and are creditworthy. Often, your lender will ask you for more documents to support your income statements before they can grant you final approval.
As a general rule, the higher your credit score, the better your chances of getting approved for a mortgage. Prequalification is a less rigorous process than prior approval, during which a lender estimates the amount of the mortgage you could get based on your credit and your answers to some questions about your income, available down payment and debts. Getting pre-approved for your mortgage at the right time on your home-hunting trip can help close the deal, preserve your credit and save you from unnecessary expenses. Possible problems that could arise in the loan approval process include delayed appraisal, delayed verification of the tax file by the IRS, delayed verification of employment by employers, and the provision of incomplete or incorrect information to the lender by the borrower.
If your credit is impeccable and you provide all the necessary documentation to your lender when you submit your loan application, your lender may be able to give you a type of approval quickly, often within 72 hours. Providing a copy of a mortgage pre-approval letter with an offer to buy can indicate to a potential seller that you have the financial means to comply with your offer. This means that you'll need to submit specific documents for prior mortgage approval, such as pay stubs, bank statements, and tax returns. Long before you begin the homebuying process, ideally six months to a year before you apply for a mortgage pre-approval or apply for a mortgage, it's a good idea to review your credit report and credit score to find out what your situation is and give you time to resolve any credit problems you may have prevent your credit scores by being the best they can be when you're ready to buy your new home.
Pre-approval of a mortgage can provide you with a significant strategic advantage when buying a home in today's red-hot real estate markets.