What Happens After Pre Approval?
In the world of home buying, understanding what happens after pre approval is crucial. This guide will give you a comprehensive insight into the complex yet exciting journey of turning your dream house into your own home.
Homeownership is often seen as a significant milestone in life, signifying financial stability and independence. Being pre-approved for a home loan is an excellent first step in this journey. But what comes next?
What Are the Next Steps After Being Pre Approved for a Home Loan?
Once your pre-approval is secured, it’s time to start house hunting. Remember, a pre-approval is an estimate of how much a lender is willing to give you. It’s not a guarantee of a loan.
Start House Hunting
After securing your pre-approval, the real adventure begins – house hunting! With a clear understanding of your potential borrowing capacity, you can refine your property search to suit your pre-approved budget.
Engage a Real Estate Agent
During this stage, it’s wise to engage the services of a professional real estate agent. They can provide insight into your specific needs and the local market, helping you identify properties within your budget.
Making an Offer
Once you’ve found a property that catches your eye, the next critical step is making an offer. Having a pre-approval makes you a more attractive buyer, and sellers are more likely to consider your offer seriously.
Maintain Financial Discipline
Remember, being pre-approved doesn’t guarantee the final loan approval. It’s crucial to maintain financial discipline during this period. Avoid taking on new debts, making major purchases, or job-hopping, as these could affect your creditworthiness.
Loan Application and Underwriting
After your offer is accepted, you proceed to the loan application stage. You’ll submit the details of your chosen property to your lender, who will conduct a property valuation. If everything checks out, your mortgage application will be sent to underwriting for final approval.
Closing the Deal
Once your loan is approved by the underwriters, you move to the closing stage. This is the final step towards homeownership, and understanding these steps can make your journey much smoother.
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Avoid the Pitfall: Chances of Getting Denied After Pre-Approval
While it’s not a common occurrence, it’s possible to get denied a mortgage loan even after obtaining pre-approval. Understanding why this might happen and how to avoid it can help you navigate the home buying process with greater confidence.
Significant Changes in Financial Circumstances
The primary reason for denial after pre-approval is a significant change in your financial circumstances. This can include a job loss, a decrease in income, taking on new debts, or a significant financial investment that impacts your debt-to-income ratio.
Discrepancies in the Information Provided
Another common reason is the discovery of discrepancies in the information provided during the pre-approval process. The lender might uncover something during the deep-dive into your financial history that was not apparent or disclosed during the pre-approval process.
Lower-than-Expected Property Valuation
Sometimes, the denial might not be about you at all. If the property appraisal comes in significantly lower than the purchase price, the lender may deny the loan. The lender needs to ensure that the property is worth the loan amount in case of default.
Avoiding Loan Denial After Pre-Approval
Here are some steps you can take to avoid loan denial after pre-approval:
- Maintain your financial stability: Continue with your current employment, avoid taking on new debt, and don’t make any significant purchases until after closing.
- Be transparent with your lender: Provide all the necessary and accurate information during the pre-approval process to avoid any surprises during the underwriting process.
- Work closely with your real estate agent: Ensure the property you’re purchasing is worth the agreed price. An experienced real estate agent can provide valuable guidance on making reasonable offers based on the local market.
Playing it Safe: What Not to Do After Pre Approval for Mortgage
Securing pre-approval for a mortgage is a significant step towards homeownership, but it’s crucial to remember that pre-approval is not a guarantee of a loan. Your actions between pre-approval and closing can significantly impact the final loan decision. Here’s what you should avoid doing after receiving your pre-approval.
Taking on New Debt
One of the biggest mistakes you can make after pre-approval is taking on new debt. Whether it’s financing a new car, opening a new credit card, or even purchasing new furniture for your future home, these actions can affect your debt-to-income ratio and credit score, potentially jeopardizing your final loan approval.
Although a new job might come with a pay increase, changing employment during the loan process could be a red flag for lenders. They prefer stable employment history, so unless it’s absolutely necessary, it’s best to hold off on job changes until after closing.
Making Large Purchases
Like taking on new debt, making large purchases could negatively affect your financial situation. It could impact your savings or increase your debt, which could change your eligibility for the mortgage.
Ignoring Your Bills
Keeping up with all your current payments is crucial during this time. Late or missed payments can negatively impact your credit score and send a worrying signal to the lender about your financial responsibility.
Applying for New Credit
Even if you don’t plan to use it, merely applying for new credit can lead to a hard inquiry on your credit report, which might negatively affect your credit score. Avoid applying for any new credit until after you’ve closed on your home.
The Waiting Game: How Long Does Mortgage Approval Take After Pre Approval?
Once you have your pre-approval in hand and have made an offer on a property, you might be wondering: how long until you get the final mortgage approval? Understanding the timeline can help manage your expectations and make the waiting game a little easier.
The Loan Application
After your offer on a house is accepted, you’ll complete a mortgage application with your lender. This process can be relatively quick, especially if you’ve already gathered all the necessary documents for pre-approval.
Property Appraisal and Inspection
The lender will then order an appraisal and possibly an inspection of the property. The appraisal ensures the property is worth the purchase price, while an inspection identifies any potential issues with the property. This process usually takes about a week, but it can take longer if there are scheduling difficulties or issues found during the inspection.
Once the appraisal and inspection are completed, your loan moves to the underwriting stage. This is where the lender verifies all the information provided in your application and assesses whether you’re a good credit risk. The underwriting process typically takes between two to three weeks.
Final Approval and Closing
After the underwriting process, you’ll receive a loan commitment letter from the lender, signifying final approval of your loan. Following this, the closing process begins, which usually takes another one to two weeks.
In general, from the time of pre-approval to the final closing, the process usually takes between 30 to 45 days. However, this timeline can vary depending on the specifics of your situation, such as the terms of your purchase agreement, your lender’s efficiency, and whether any issues arise during the appraisal, inspection, or underwriting stages.
During this period, it’s crucial to maintain open and consistent communication with your lender and real estate agent. They can provide updates on where you are in the process and what steps come next, helping make the wait for your final mortgage approval less stressful.
Closing the Deal: After Loan Approval, How Long Before Closing?
Once your loan has been approved, you’re on the home stretch. But there’s still one critical step left: closing. Understanding the timeline and what’s involved can help you prepare effectively.
The Loan Commitment
After your loan approval, the lender will issue a loan commitment letter. This document details the terms of the loan and the amount the lender is willing to lend you. At this stage, the lender has committed to lending you the funds, but there might be a few final conditions to meet before closing.
The lender may conduct a final verification of your financial status and employment to ensure there haven’t been any significant changes since the approval. They may also check that the property’s title is clear and arrange for title insurance. This process typically takes a few days.
The Closing Disclosure
At least three days before closing, the lender will provide you with a Closing Disclosure. This document gives you a final detailed list of all loan costs, the amount you need to bring to closing, your monthly mortgage payments, and any additional fees.
The Closing Process
The closing process itself involves signing a significant number of documents, including the mortgage agreement, the deed to the property, and the Closing Disclosure acknowledgment. This process can be quick, often completed within a day.
Generally speaking, once you’ve received final loan approval, it takes about one to two weeks to reach the closing stage. However, it can take longer if there are any issues with the final verification or if there are conditions specified in the loan commitment that need to be resolved before closing.
Under the Microscope: What Happens After Underwriter Approved Loan?
The approval from the underwriter is a significant step towards homeownership. It means you’re past the most in-depth review of your financial situation and are one step closer to getting the keys to your new home. So, what’s next after the underwriter gives the green light?
Receiving the Clear to Close
Once your loan is approved by the underwriter, you will receive a “clear to close” from your lender. This indicates that all the necessary documents have been reviewed and are in order. It’s one of the final stages before the actual closing can occur.
Preparation for Closing
At this stage, preparations for closing will begin. This involves scheduling a date, time, and place for closing. Your real estate agent or attorney will coordinate with all parties involved in the transaction to ensure everyone is available for the scheduled closing date.
Before the closing, you’ll typically have the opportunity for a final walkthrough of the property. This is your chance to ensure the property is in the condition agreed upon in the contract, and any agreed-upon repairs or improvements have been completed.
Review of Closing Documents
You will also receive your closing disclosure at least three days before the closing date. This document will provide the final details about your mortgage loan, including loan amount, interest rate, closing costs, and the amount you’ll need to bring to the closing.
During the closing, you’ll sign various legal documents, such as the mortgage agreement and deed of trust, which legally commit you to the mortgage loan. Once all the documents are signed and the closing costs and down payment are paid, you’ll receive the keys to your new home.
Remember, after underwriter approval, it’s crucial to maintain the same financial behaviour until the closing. Any significant changes could affect the loan terms or even derail the closing process. By following the steps outlined, you can ensure a smooth transition from underwriter approval to closing.
Take Control of Your Home Ownership Journey
Understanding what happens after pre approval gives you more control over your home-buying journey. Knowledge is power, and with this power, you can reduce the chances of surprises, delays, and disappointments. Start preparing for your future today, armed with the knowledge you’ve gained from this article.
Get a free Australian mortgage assessment today.
Frequently asked questions
After pre-approval, the next step is house hunting, making an offer, loan application, underwriting, and closing the deal.
When you get pre-approved, you receive an estimate from a lender stating how much you might be able to borrow based on an initial review of your creditworthiness.
The mortgage approval process typically takes between 30 to 45 days from the day of submitting a complete mortgage application.
Yes, you can be denied after pre-approval. This usually happens if there are significant changes to your financial situation, or if the lender uncovers discrepancies in the information you provided.