What is a mortgage preapproval?

If you are interested in purchasing a home, securing a preapproval is a critical step to take before you start shopping. A conversation with your lender can help you determine the purchase price range that you should be shopping in. Your lender will review your credit, income, and assets to determine how much of a loan you are qualified to borrow. That loan amount, combined with your down payment will make up the purchase price that you are approved to buy. The preapproval letter is your ticket to submit offers on homes. It will list key details such as the purchase price, down payment, loan amount, proposed loan terms, and your name. Most real estate agents will want to have a copy of your preapproval letter in hand before they take you on home tours, especially in competitive markets.

What different options are there?

There are a few different forms that this letter can take. Depending on the lender that you work with, you may be able to secure up to three different types: 

1. Prequalification letter: This is the result of a phone conversation with a lender in which you talk through your stated income, assets, and monthly obligations. Based on the information that you provide, a lender can back into the loan amount that you may qualify for. This letter does not require a credit pull or any documents to be collected. 

2. Preapproval letter: This is one step beyond the prequalification letter. To secure a preapproval letter, you will need to contact your lender to fill out a complete mortgage application and have your credit pulled. The lender will pass your application through an automated underwriting system to confirm that you are eligible for the purchase price and loan amount selected. 

3. Verified preapproval letter: This is the best letter available in the market. It will give you the most purchasing power possible by showing sellers that you are a highly qualified buyer. To obtain this letter, you will need to complete the mortgage application, have your credit pulled, and supply the necessary income and asset documentation requested by your lender to complete the initial underwriting approval. Once your credit, income, and asset documentation is reviewed by an underwriter, the lender will produce a verified preapproval, allowing you to shop with confidence knowing that you are qualified to purchase a home.

When should I get preapproved?

If you are interested in purchasing a home, or may be interested in the near future—don’t wait! Competitive markets require quick movement. It's important to have a letter in hand from a lender if you intend to submit any offers. Most preapproval letters are good for 60 days, as long as nothing changes with your employment or monthly obligations. If the preapproval that you selected involved a credit check, the credit report is good for 120 days and new letters can be issued up until the credit report expiration.

Why use Sage Mortgage?

Sage Mortgage offers all three preapproval letter options! No matter where you are in the homebuying process, you can consult with one of our loan officers and decide which option is right for you. Once you have been preapproved, you can expect weekly follow-ups from your dedicated loan officer, who can provide market updates, helpful house hunting tips, and keep you informed on any important dates.

Once your offer is accepted, you can rest assured that you will have access to industry-leading pricing and best-in-class customer service through Sage Mortgage.