Worried if you’ll get a pre-approval for a mortgage? Well, here is the guide that you’ve been looking for. In this guide, we will discuss how one can make sure they are pre-approved for a mortgage. More importantly, we will see how a mortgage works and what exactly is it, and what role does getting pre-approved play in it. Let us begin with the guide and see how it goes.
Why is getting pre-approved for a mortgage necessary?
Getting pre-approved for a mortgage is a crucial first step in the home-buying process. It demonstrates to sellers that you’re a serious and qualified buyer, giving you a competitive edge. It is like a first impression that you create in front of the people and the service you are taking the help of when you try to deal with a mortgage. However, don’t worry as it gets easier. Let us cover that in the next section.
How to get pre-approved for a mortgage?
If you want to get pre-approved for a mortgage, then these are the basic things that you will be required to do!
Check your credit score and report
The first thing here would be to check your credit score and report and then to think about something else. A good credit score is essential for securing a mortgage with favorable interest rates. Aim for a score of 620 or higher, with 740+ generally qualifying for the best rates. Obtain copies of your credit reports from all three major credit bureaus and review them for errors.
Assemble the financial documents
The next thing is to assemble all the financial documents related to your situation and your request. This will include your Proof of income and the proof of other income, in case you are applicable for that. Others include bank statements and debt information that will help the service providers understand your financial situation better.
Decide on your budget
The next thing you can do is to decide on your budget. Evaluate your income and your assets and then make an informed decision, as a miscalculation may cause you trouble in the long run. Calculate your DTI, which is the percentage of your gross monthly income that goes towards debt payments. Lenders typically prefer a DTI of 36% or lower, so keep that in mind.
Find a decent lender
Now that a huge chunk is done, you need to finally look for a decent lender. A good lender can be decided upon after going through the internet or going to a person you know already.
Complete the Mortgage Pre-approval application
This is the final step, and you are required to do it. You can complete the application and let the service providers do the inquiry on their end, which they do thoroughly. Once approved, the lender will provide you with a pre-approval letter. This letter will state the maximum loan amount you’re qualified for, the estimated interest rate, and the loan program.
And that is basically how you can work for the pre-approval of a mortgage.
