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Getting Mortgage Pre-Approval In 6 Steps

Getting Mortgage Pre-Approval In 6 Steps

Getting pre-approval for a mortgage is simple, uncomplicated, and one of the most crucial steps you can do when planning to purchase a house. A mortgage pre-approval proves to the seller that you are a serious buyer. Pre-approvals do not imply final approval; they just give you the freedom to look around for the perfect house. If you’re serious about purchasing a home, read on to learn how to get a mortgage pre-approval in six steps.

How to Get Pre-Approved for a Mortgage?

It’s ideal to be prepared for the mortgage pre-approval process, which might include a lot of  paperwork, such as gathering documents and responding to questions from your lender. Let’s go over each step of the process:

Verify Your Credit Score

Before you start applying to lenders, you should have an overview of your credit status and how likely you are to secure pre-approval. A 620 credit score is usually required to qualify for a conventional mortgage. To qualify for an FHA loan, you must have a credit score of at least 580. If you have a poor credit score or recent unfavorable occurrences on your credit record, like foreclosure or missed payments, you may have difficulty securing a mortgage.

Compute the Debt-to-Income Ratio

Your debt-to-income ratio is another important factor when applying for a mortgage. To estimate your DTI, add all of your minimum monthly loan payments and divide the total by your monthly income. The maximum DTI you can have and still be eligible for a mortgage is usually 50%. However, based on your lender, the type of loan you’re applying for, and the rest of your financial status, you may be expected to have a smaller ratio.

Decide on a Down Payment

The lender will ask you how much you have accumulated for your down payment as part of your application. If you’re getting money from a close relative to assist with your down payment, you’ll probably need them to send you a letter stating that the payments are a gift. While FHA borrowers must put down a minimum of 3.5%, conventional mortgage applicants can put down as little as 3%. Some mortgages, like USDA and VA loans, require no down payment at all.

Find a Mortgage Company 

Most mortgage websites provide free mortgage pre-approvals with no commitment to proceed. After getting pre-approved, many homebuyers seek their mortgage from a separate mortgage firm. The most important aspect of securing a pre-approval is that you get one. You cannot purchase a property without a pre-approval.

Gather Financial Documents

The lender may request supporting documentation as part of your pre-approval, like:

  • Bank statements 
  • W-2 statements
  • Pay stubs and evidence of deposits
  • Federal income tax returns
  • Student loan statements

Your lender will inform you exactly what paperwork is required, but having everything prepared ahead of time will make the process go more smoothly.

Fill Out an Application

You can start your pre-approval paperwork when you are ready. Many lenders let you complete this online, but you could also get started in person or over the phone if the lender operates physical branches.

Getting pre-approved before you start searching for a house benefits everyone. Contact us today to get the dice rolling!

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