Does Pre-Approval Guarantee a Loan..?

Does Pre-Approval Guarantee a Loan..?

No. Even if you receive a pre-approval letter from a lender you connected with, you may not get a loan from a lender and you are not guaranteed a specific rate or loan term. Regardless of pre-approval, a lender may require additional income and asset verification, as well as the satisfaction of other conditions, before extending you a loan. Pre-approval letters are subject to modification or cancellation if your financial situation or other conditions change.

A pre-approval letter is not an offer to lend, a commitment to make a loan, or a guarantee of specific rates or terms. It is not an application for credit. Also, having a pre-approval letter does not guarantee that an offer you make on a home will be accepted by a seller. 

What If I Can’t Get Pre-Approved?

Not everyone will get pre-approved for a mortgage, but there are a few things you can do to get better prepared for the financial responsibility of home ownership:

• Work to improve your credit score. Your credit score is impacted by payment history, outstanding debt, the length of your credit history, recent new credit inquiries, types of credit used, and more. Generally a score of 720 and higher will get you the most favorable mortgage rates.
• Correct any errors on your credit report, which could help to raise your credit score. The lender will analyze your credit report for any red flags, such as late or missed payments or charged-off debt. Even if you are deemed to have bad credit, there are ways to still get pre-approved for a mortgage.
• Decrease your overall debt and improve your debt-to-income ratio. In general, a debt-to-income ratio of 36 percent or less is preferable; 43 percent is the maximum ratio allowed. Use a debt-to-income calculator to determine your debt-to-income ratio.
• Increase your down payment amount in order to qualify for a larger loan. Learn more about down payments.

Regardless of the loan amount you’re pre-qualified for, stick to your budget.

The amount you can comfortably afford. Your lender may pre-qualify you for more than you think you can comfortably afford. If this happens, you can always scale back to a lower loan amount.

Remember:

You’re not obligated to share your pre-qualification amount with real estate professionals, so simply ask them to only show you homes in the price range that fits your financial comfort zone.

Click here to calculate what mortgage you pre-qualify for