If you’re in the market for a new home, one of the best tools to have is a mortgage pre-approval letter. This essential document can tailor your search, since it provides the loan amount you may qualify for. However, if you’re buying a home for the first time, the pre-approval process can feel overwhelming. To help clear up any confusion, here are answers to several commonly asked questions.

Your Questions About Mortgage Pre-Approval, Answered

How does the process work?

A mortgage lender will review your financials to determine the loan amount you might qualify for. They’ll look at your income, outstanding debt, and credit score. Based on these figures, you’ll receive information on the maximum amount you can borrow. 

Why should I get pre-approved?

Suppose you spot a beautiful home for sale in a nearby neighborhood. It has all the features you want — a big backyard, garage, and beautiful curb appeal. However, after checking the listing details online or through an agent, you discover that the price is more than you can afford. Getting pre-approved helps avoid this type of scenario. When you know the loan amount you’re eligible for, you can look for houses around and under that price threshold.

Does pre-approval mean I will get the loan?

Although it’s a reliable guideline, a pre-approval document does not guarantee that you’ll receive the loan. In addition, the interest rates and terms are a guide and may not be set in stone. When you’re ready to buy, you’ll have to undergo the loan application process, which requires additional income and asset verification. 

Will pre-approval help me with the seller?

If you have a pre-approval letter in hand when approaching a seller, it shows them you’re committed to buying. It can also help you stand out among other eager shoppers who haven’t been pre-approved. Keep in mind the letter doesn’t guarantee that a seller will accept your offer on the house, and most pre-approvals are only in effect 60 to 90 days from the date of issuance.

For more than 80 years, First State Bank in Russellville, AR, has helped individuals and families throughout the River Valley secure affordable mortgage loans. The team of experienced and friendly lenders at the locally owned bank make all loan decisions in-house. You can always expect personalized attention and lending options tailored to your unique financial needs. To learn more, call (479) 498-2400 or visit the online mortgage web center, where you can start the application process today.