House hunting: The power of preapproval

A guide to PNC's process

If you're in the market, this is a good time to visit PNC to get preapproved for a mortgage. There are real advantages to taking this step early in your house hunting process. First, you'll go into the market with your eyes wide open regarding how much you can afford to spend. Second, being preapproved for a loan gives you a powerful bargaining chip with sellers because they know you have the financial ability to make the purchase a reality. That automatically gives you a leg up on other potential buyers who have not lined up their financing.

How to get preapproved

A loan officer can give you a good idea of how big of a mortgage you can qualify for, but if you want a commitment, you'll need to provide detailed financial information. Ask a PNC representative exactly what you need. A PNC Mortgage senior underwriting manager outlines the requirements.

  • A look at the past two years of income, plus year-to-date information. This would include things like your tax returns, W-2s, pay stubs, etc.

  • A look at your assets. This includes liquid assets-money in bank and brokerage accounts, for example-and less-liquid assets, such as funds in a 401(k) account or IRA, to which your access is somewhat restricted. The PNC Mortgage Rep says he looks for assets sufficient to cover the down payment and closing costs on a home plus a reserve large enough to cover mortgage payments for anywhere from two to 12 months.

    What if you're a first-time buyer who is getting help with the down payment via a gift from your parents? For that money to count as your asset, you'll need to provide a "gift letter" certifying that the money is a gift (not additional debt) and evidence that the cash has been transferred to your account.

  • A look at your debts. Your ability to handle mortgage payments partly depends on the amount of your resources already committed to repaying other loans. As a general rule, no more than 28% of your monthly income should go toward mortgage payments and no more than 36% toward all debts. In some cases, however, a higher debt-to-income ratio is allowed.

  • A look at you credit history and credit score. Credit scores range from 300 to 850. The minimum PNC will accept for a mortgage is 620 and a score of 780 or more is the gold standard.

The verdict is ...

Once an underwriter reviews and verifies your information, you'll get a preapproval commitment to lend you up to a certain amount of money on a certain kind of mortgage at a certain rate. For example: $300,000 on a 30-year-fixed mortgage at 4.85%. The maximum loan amount and rate are determined by a combination of factors including your income, your proposed down payment, your debt-to-income ratio and your credit history and score.

The review normally takes 24 hours or less from the time a customer submits an application with required documentation. There is no charge for this service.

PNC preapproval is good for 60 days. Good luck with your house hunting.