Tag Archives: Mortgage Preapproval

Mortgage Prequalification vs. Preapproval: What’s the Difference?

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If buying a home is on your radar, you’ve probably heard the terms prequalification and preapproval. They sound similar, and both can help you better understand your homebuying budget, but they aren’t exactly the same.

Knowing the difference can help you determine which step makes sense based on where you are in your homebuying journey.

What is Mortgage Prequalification?

Mortgage prequalification is often an early step for prospective homebuyers. It can estimate how much you may be able to borrow based on the financial information you provide, such as your income, assets, and existing debt.

Think of prequalification as a starting point. You may not be ready to make an offer on a home yet, but you want to understand what could realistically fit within your budget.

A prequalification can be particularly helpful if you:

  • Are beginning to think about buying a home
  • Want a better idea of your potential price range
  • Are comparing renting versus buying
  • Want to identify financial areas you may need to work on before seriously shopping

Because prequalification is based on preliminary information, the amount you’re ultimately approved to borrow may change after a full review of your finances.

What is Mortgage Preapproval?

A mortgage preapproval is generally a more detailed step. During the preapproval process, the lender reviews and verifies additional financial information. This may include your income, assets, debt and credit history. You may also need to provide documentation such as pay stubs, bank statements or tax information.

If you meet the lender’s initial requirements, you may receive a preapproval letter showing how much you could potentially borrow, subject to the lender’s conditions and final approval.

A preapproval can be especially helpful once you’re ready to actively shop for a home. In a competitive market, sellers and real estate agents may also see a preapproval letter as a sign that you’ve already taken important steps to secure financing.

Prequalification vs. Preapproval: Which One Do You Need?

The answer may depend on how close you are to buying.

If you’re starting to explore your options, getting prequalified can help you understand how much you may be able to afford.

If you’re ready to actively shop for a home, getting preapproved may make more sense since the lender will take a closer look at your finances.

Neither one guarantees that you’ll ultimately receive a mortgage. Final approval typically occurs later on in the process, after you select a property, complete a formal mortgage application, and satisfy the lender’s underwriting requirements.

Don’t Let Your Maximum Determine Your Budget

Whether you receive a prequalification or preapproval, remember that the amount you may qualify to borrow and the amount you’re comfortable spending aren’t necessarily the same.

Your monthly mortgage payment is just one part of the cost of owning a home. Your budget will also need to cover property taxes, homeowners insurance, utilities, maintenance, potential repairs, and other ongoing expenses.

Before deciding on a price range, take a close look at your overall monthly budget and consider which payment option allows you to continue working toward your other financial goals.

You don’t need to shop at the very top of your borrowing range, choose an amount that feels comfortable for you.

Prepare Before You Start the Process

Whether you’re seeking prequalification or preapproval, it helps to have a clear picture of your finances.

Before speaking with a lender, consider reviewing:

  • Your monthly income
  • Your current debt and monthly payments
  • Your savings available for a down payment and closing costs
  • Your credit history
  • Your anticipated homebuying budget
  • Other financial goals and expenses you need to account for

Getting organized early can also help you have a more productive conversation with your lender about your options. For a step-by-step overview of what to expect throughout the mortgage process, check out our Homebuyer’s Guidebook.

Take the First Step with First Financial

You don’t have to figure out the mortgage process on your own. First Financial offers mortgage prequalification and preapproval options to help prospective homebuyers within Monmouth or Ocean Counties take the next step with greater confidence.*

If you’re just beginning to shop, a prequalification letter can help you better understand your potential price range. If you’re ready to take your home search to the next step, our team can help you explore the preapproval process and your available mortgage options. Get started with our quick mortgage preapproval inquiry form.

Wherever you are in your homebuying journey, starting the conversation early can help you understand your options, prepare financially, and shop with a clearer picture of what may work for you.

Ready to get started with First Financial? Schedule a video chat or phone call with our Mortgage Team or call 732-312-1500, Option 4.*

*Subject to credit approval. Minimum mortgage loan amount is $100,000. Available on primary residence only. Mortgage insurance may be required depending on loan guidelines. This is not a credit decision or a commitment to lend. See Credit Union for details. A First Financial membership is required to obtain a Mortgage and is open to anyone who lives, works, worships, volunteers, or attends school in Monmouth or Ocean Counties. Qualified borrowers must meet eligibility requirements including, but not limited to, property location, loan amount, loan type, occupancy, property type, loan-to-value, debt-to-income ratios, FICO credit scores, refinance with cash out and other variables. A $5 deposit in a base savings account is required for credit union membership prior to opening any other account or loan. Other terms & conditions may apply, see the credit union for details.

NMLS CU ID: 685814. Equal Housing Lender.

Essential Tips for Navigating the Spring Housing Market

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Why Prepare to Buy in Spring?

The spring housing market, peaking from April to June – is renowned for its heightened activity. The allure of spring lies not just in its weather, but also in the potential for finding great deals on homes that didn’t sell or were not listed in winter. The spring market – fueled by both new listings and the eagerness of buyers who are shaking off the winter chill, creates a landscape filled with opportunity. First Financial is here with 5 essential tips for a successful springtime homebuying journey.

1. Gauge Market Conditions: The spring market’s vibrancy varies, influenced by whether it leans in favor of buyers or sellers, prevailing mortgage rates, and local real estate trends. Keeping a pulse on these conditions can significantly impact your buying strategy. Evaluate each condition closely before making any commitments.

2. Isolate Your ‘Must-Haves’ From Your ‘Wants’: In the bustling spring market, knowing what you’re looking for is crucial. This includes the type of home, desired neighborhood, and essential amenities. However, with heightened demand and high competition, it’s important to isolate what you truly need from the things you want. A well-defined list of must-haves will streamline your search and help you act decisively.

3. Mortgage Preapproval is Key: Securing mortgage preapproval before diving into the housing market not only sets realistic expectations – but also positions you as a serious buyer, enhancing your bargaining power. Preapproval will allow you to know how much home you can realistically afford, as well as lock you in at the best interest rate.

Here at First Financial, we’re here to help you throughout the mortgage process. Stressed about where to start? Schedule a video chat or phone call with one of our mortgage experts with no commitment required! Ready to get preapproved? Simply fill out our quick mortgage inquiry form and a member of our Loan Department will contact you. You can also choose to sign up for our mortgage rate text alerts, and we’ll send you a text whenever our mortgage rates change.+

Not ready to apply just yet for a First Financial mortgage? Utilize our wide range of website mortgage calculators to help you plan for the future!

4. Leverage Expertise: Collaborating with a real estate agent who understands the nuances of the spring market can be invaluable. They can provide insights into fair pricing, negotiate on your behalf, and even unearth hidden gems in your desired locations. Having a real estate agent on your side will position you ahead of buyers heading the journey alone and take many stressors off your shoulders.

5. Have Your Documents Ready: If you’ve made an offer and are hoping to fast-track the process, make sure you have your paperwork ready to go. The process of compiling all the necessary documents can be longwinded, so be sure to get a jump on things and have all your ducks in a row. Some of the documents you’ll need include:

  • Identification
  • W2s
  • Pay stubs
  • Bank statements

Before making an offer, build a mortgage document checklist to keep track of what you’ll need to close the deal. Our homebuying guide is a great resource!

Embrace the Spring Market with Confidence

The spring housing market offers a unique blend of challenges and opportunities. With strategic preparation, you can navigate this bustling season effectively. Whether you’re gauging market conditions, calculating what you can afford, or securing mortgage preapproval – we’re here to help you achieve your homebuying goals.

Contact us today and embark on your journey to homeownership with confidence. Don’t miss out on more financial tips and advice, be sure to subscribe to our First Scoop blog.

*APR = Annual Percentage Rate. Subject to credit approval. Credit worthiness determines your APR. Rates quoted assume excellent borrower credit history and are for qualified borrowers. Your actual APR may vary based on your state of residence, approved loan amount, applicable discounts and your credit history. Higher rates may apply depending on terms of loan and credit worthiness. Minimum loan amount is $100,000. Available on primary residence only. The Interest Rates, Annual Percentage Rate (APR), and fees are based on current market rates, are for informational purposes only. Mortgage insurance may be required depending on loan guidelines. This is not a credit decision or a commitment to lend. If mortgage insurance is required, the mortgage insurance premium could increase the APR and the monthly mortgage payment. See Credit Union for details. A First Financial membership is required to obtain a Mortgage and is open to anyone who lives, works, worships, or attends school in Monmouth or Ocean Counties. Qualified borrowers must meet eligibility requirements including, but not limited to, property location, loan amount, loan type, occupancy, property type, loan to value, debt to income ratios, FICO credit scores, refinance with cash out and other variables. NMLS CU ID: 685814. 

 +The Text Message Signup box must be checked in order to receive text messages. Standard text messaging and data rates may apply.

3 Steps to Take Before Seeking Preapproval for a Mortgage

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Wooden house with keys

With interest rates rising, many people are rushing to buy a home early this season. If you are one of these people, then know that it’s especially important to get preapproved before you begin hunting for that dream home. With a competitive seller’s market, getting that proof gives you a leg up because the seller knows you’re “good for it,” so to speak. Here are some steps that will ensure you get the home loan that’s right for you.

#1: Determine what you can afford.

Being assured by a lender that you’re approved to borrow a certain amount doesn’t mean you can afford the sum. Despite laws that hold lenders more accountable than before the housing crisis, these companies are still known for offering larger loans than borrowers can afford. So, how do you know what you can actually afford?

  • Look at what you’re currently paying for housing, and try to stick as close to it as possible.
  • Look at the whole picture. Calculate the true expense by combining the principal, interest, taxes and insurance (an easy acronym to remember is PITI). What’s your down payment? If it’s less than 20%, you may also need to factor in an extra $50 to $300 per month for mortgage insurance. Don’t worry about the math though — there are plenty of online calculators that can help! Check out First Financial’s right here.

#2: Know what you’ll need to provide.

To get pre-qualified, a lender will ask simple questions about your income, assets, and debt. Preapproval means you’re offered a particular loan amount, so it’s a little more serious and usually comes with an application fee.

The lender will consider your debt-to-income ratio, your ability to repay the loan, and your FICO credit score (which influences your interest rate). To do this, they’ll run a credit check and ask for a list of financial documents, usually the following:

  • Bank statements for the last few months
  • Tax returns and W2s for the past few years
  • Proof of employment and income (pay stubs)
  • Anything else they believe could strengthen your loan application

Having these documents ready to go will streamline the process.

#3: Get your finances in shape.

Once you know what a lender will be looking for, work on anything that’s below standard. For instance, have you held a regular job for at least a few months? Lenders look for job stability. If you’ve jumped around, or if you’re considering a career move, staying put for now might improve your loan terms.

Have you taken on any new credit accounts or loans or closed old ones? Recent shifts in credit, such as getting a bunch of credit cards even if your intention was just to grab those sign-up bonuses, can affect your debt-to-income ratio and perceived financial stability.

Finally, take a look at your credit report and score. Is it below 620? You might have trouble qualifying. Is it at or above 720? You’re in the sweet spot for the best interest rates.

Simple things like making payments on time and paying off your credit card balance each month can improve your score and save thousands of dollars in interest over the lifetime of a loan. This process takes time though.

You really need to make sure you are ready to buy a house long before you even start planning to purchase it. If a home is at all on your radar, then start immediately and get prepared well before looking for a good mortgage lender.

Stop into any First Financial branch and we can help you with your home buying journey. We provide great low rates and offer a variety of Mortgage options – to speak with First Financial’s lending department, call us at 732.312.1500 option 4.* 

First Financial also offers a Mortgage Rate Text Messaging Service so you can receive updates on our low Mortgage Rates straight to your mobile phone. You can subscribe to our Mortgage rate text message service by signing up for text alerts, and receive instant notification when our mortgage rates change.**

*APR = Annual Percentage Rate. Subject to credit approval. Credit worthiness determines your APR. Rates quoted assume excellent borrower credit history and are for qualified borrowers. Your actual APR may vary based on your state of residence, approved loan amount, applicable discounts and your credit history. Higher rates may apply depending on terms of loan and credit worthiness. Minimum mortgage loan amount is $100,000. Available on primary residence only. The Interest Rates, Annual Percentage Rate (APR), and fees are based on current market rates, are for informational purposes only. Rates and APRs listed are based on a mortgage loan amount of $250,000. Mortgage insurance may be required depending on loan guidelines. This is not a credit decision or a commitment to lend. If mortgage insurance is required, the mortgage insurance premium could increase the APR and the monthly mortgage payment. See Credit Union for details. A First Financial membership is required to obtain a Mortgage and is open to anyone who lives, works, worships, or attends school in Monmouth or Ocean Counties.

**You must check the Text Message Signup box when registering in order to receive rate change text messages.+ If you do not receive an automated confirmation message after enrolling, please text “Yes” to (201) 808-1038

+The Text Message Signup box must be checked in order to receive text messages. Standard text messaging and data rates may apply.

Article Source: Jessica Sommerfield for MoneyNing.com