Pre-granted mortgage and pre-approval
Let us put ourselves in the situation that after much thought, we have finally taken the decision: we have requested a mortgage from our bank. Now, like any procedure that is respected, we are awaiting a response... Is there a way to shorten the wait?
Before going to the bank, it would be a good start to make our own calculations with the to find out, depending on the value of the home, the amount that we need to request from the bank, the town/city and the years that the loan is to be financed; we can know all the expenses associated with the mortgage and the sale, the type of mortgage that best suits you and what you are going to pay month by month for the mortgage.
If entering data on the price of the home, the value of the instalment, the total income and the cash value the figures look bad, we would surely avoid future procedures. If you have any doubts, experts can advise and guide you throughout the process without any type of commitment regarding the mortgage.
If we have already carried out that step and have reached the next level, indeed, we will have a way of ascertaining more quickly if we are more or less close to obtaining the loan: pre-approval, a provisional response that the entity gives us after its risk department has analysed certain basic financial data relating to our identity and our economic position. Basically, we must be aged between 25 and 55, provide our national ID number, the summaries of our credit cards and the balances of other possible loans and, if self-employed, provide our tax return and a payment service receipt.
This procedure is usually carried out online and, afterwards, the bank will give us a document that will be useful in several ways: on the one hand, it will be able to guide us a little more about our possibilities and the instalment that we will have to pay. And, on the other hand, it will act as a guarantee against the seller of the home.
It is important to note that this pre-approval is not binding but, in any case, if we obtain it, we would be closer to receiving our loan. And if we do not obtain it, surely we would have to review the data that we have entered, and also check the risk criteria to get an idea of the reason for the rejection. So first of all, let us recall that we must have 30% of the price of the property, and a monthly income at least three times greater than the monthly payment. In addition, our age or our employment situation will also be decisive.
Pre-approval or pre-qualification?
Both pre-approval and pre-qualification are two approaches that the bank will carry out when it comes to assessing whether it grants us the mortgage.
It should be noted that each entity provides an assessment based on its own criteria. Furthermore, in both cases, it is only an approximation, and in no case is it binding; you have to realise that they only assess basic data and they do not even have a home appraisal.
In any case, let us go into depth in a mortgage pre-qualification. To perform the pre-approval, the bank asks us for some documents, then provides a credit score based on the requirements that we meet and finally prepares a report. Instead, pre-qualification is provided verbally, and only takes into account the information that we submit, making it less reliable. When we carry out a pre-qualification we also obtain a document: a pre-qualification letter, which we can also show to the seller of the property. This way you can verify that we are really interested in the purchase, since we have taken the time to make the consultation, for which we have used a professional.
But ultimately, this document is not as valid or as solid as the pre-approval, so the next step will be for the seller itself to request it from us.