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The Steps to Homeownership: Mortgage Preapproval
If you've never owned a home, you may think the home loan process is intimidating. In order to make home loans more accessible to borrowers, UW Credit Union provides many convenient services for you to take advantage of. One of these services is a preapproval.
What is a Preapproval?
A mortgage preapproval occurs when we agree to lend you a specified amount of money before you have found a home. To apply for a mortgage, you will first fill out an application. A complete review of your credit history is performed and the information you've provided is validated. Based on that information, the loan can then be preapproved.
Why a Preapproval?
With a mortgage preapproval, a homebuyer can make an offer on a home with confidence, knowing he/she will not fail to secure a home due to a mortgage underwriting decision. Sellers also enjoy the comfort of knowing the buyer is sincere in his/her home ownership goal. In addition, a preapproval can help you save time and frustration by narrowing your house-hunting to properties you are sure you can afford.
When you apply for your mortgage, a preapproval is issued subject to you finding the perfect home. You can use a preapproval letter you'll receive to assure Real Estate Brokers that you are a qualified buyer. Having a preapproval can also give you an edge, as it may give more weight to any offer to purchase that you make, and you are able to move more quickly. Also, sellers may look more favorably on an offer that is not contingent on loan approval, especially if you are in a competitive situation in which multiple would-be buyers are making offers.
What Steps Do I Take to Get Preapproved?
Fill out our online mortgage application with a target loan amount and sales price, or apply by phone by calling 800-533-6773. These amounts may change as you wade into the property market, but it's important to establish a starting point. Your application is subsequently reviewed, in addition to your credit history. Depending on the type of mortgage request, your income and down payment sources may need to be verified.
When you find the perfect home, simply complete your application. Once approved, you'll have an opportunity to pay your application deposit and lock your rate and fees while your request is processed.
Important Items to Consider
Please keep in mind that although a preapproval is a good indication you'll receive a loan of the agreed amount, it is not guaranteed. The purpose of the preapproval is for the lender to express a desire to fund a mortgage based on the applicant(s) credit and income. If issues relating to the property arise, it might cause the lender to decline to participate in a mortgage. Examples of this include, but are not limited to: A home with a purchase price not supported by a market appraisal, one with structural damage, one with open building permits or one having a feature which may limit the marketability of the property—such as biological, chemical or environmental hazards.
Another potential hurdle regarding mortgage preapprovals is a fluctuation in interest rates, and/or the buyer's financial picture since the time of initial mortgage approval decision. If interest rates move up sharply, or the buyer's income or down payment suffer an unexpected decline, the basis for the mortgage preapproval will have changed and therefore the lender may choose to decline to participate in a mortgage.
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