Don’t underestimate the power of being prepared when you decide it’s time to get a preapproved mortgage. With the right preparation, you can get your mortgage preapproval more easily. That can give you peace of mind, and help you move forward with putting an offer on a house you really want to buy. In order to have the highest chance for mortgage preapproval, here is a simple checklist you can follow. Then you’ll feel more comfortable with the entire process, and can be confident in your financial ability to get the house you’ve fallen in love with.
1). Make the commitment to buy a home.
Before you head out for a preapproval, make sure you’re ready to buy a home. You generally want to get preapproved before seriously looking at houses, but that doesn’t mean you won’t have made the definite decision to purchase. Once you’ve decided that it’s time to buy, the preapproval letter should be the first thing on your checklist.
2). Have a down payment.
A down payment is important, because it can show that you’re serious about getting a mortgage. It can also give your lender a good idea of how much you’ve accumulated and whether your income and debt levels appears to make sense with the down payment you have. Many programs require a very low down payment amount, and you can even get some programs where you don’t have to put anything down at all. Still, having a 20% down payment can help you avoid PMI (private mortgage insurance), which can save you money every month.
3). Know your credit.
When you’re buying a home, your credit is very important. Since a home is such a big purchase, your lender will look at your credit report and score carefully. If you have credit problems, correct and mitigate them as much as possible before you make your bid for preapproval. While you may not be able to fix everything on your credit, it’s important to do the best you can, and to have a high enough score to qualify. If your score is too low, you’ll need to wait a while before you decide to apply.
4). Consider recent spending.
Before you try for a preapproved mortgage, consider what you’ve done financially in recent months. If you’ve opened a new credit card, secured a new loan, or accumulated a lot of debt, that can hurt your credit score and your preapproval chances. In that case, you might have to wait just a little while, so your score will come back up and you can be approved. If you haven’t made any big purchases, you should keep it that way until after you close on your house.
5). Calculate your debt to income ratio.
The level of debt you have and the income you produce both matter, and they have to work together in the right ratio before you can be preapproved. Even if you have a really great income, you can still have too much debt to qualify for the mortgage you want. It’s important to know your ratio, and to ask your lender what kinds of ratios qualify. Depending on the type of loan you’re trying to get, the ratio you need can be different.
6). Â Get your paperwork in order.
Being able to prove who you are and how much you make is vital. The more paperwork you have in order, the better your chances will be of getting your preapproval. Ask your lender what they need, and produce it as soon as possible.
7). Factor in your length of employment.
As you make house buying plans, your length of employment will matter. If you’ve changed jobs recently, but you still work in the same field, that can help your chances because it doesn’t count against you nearly as much as completely changing career paths. If you’re self-employed, you’ll generally need at least two years of tax returns in order to be considered for a mortgage.
8). Be able to prove everything you claim.
Stated income loans used to be popular, but they’re mostly a thing of the past now. Be prepared to be open and honest with your lender about your income, credit, and other factors. You will need to be able to prove what you claim, from your credit score to your income. Financial information is some of the most important information you can offer to your lender.
9). Be ready to offer more information.
You may be asked for a lot of information in order to be preapproved for a mortgage. Your lender will do a thorough job, especially if your approval is questionable in any way. If you’re not willing to provide timely and accurate information, you may not have the opportunity to be given a preapproval. The process can take time, but is well worth it to purchase a home you love.
10). Know what house (or price range) you want.
If you already have a house in mind or you know how much you want to qualify for, be sure to let your lender know. That way you can get a more specific preapproval that you can take to your real estate agent, so you can put in an offer on a house.
By following these 10 steps, you can have the best chance of getting your mortgage preapproved. If there are problems your lender will tell you what they are, so you know what to work on in order to be approved in the future.
2 Point Highlight
By following these 10 steps, you can have the best chance of getting your mortgage preapproved.
Don’t underestimate the power of being prepared when you decide it’s time to get a preapproved mortgage.
