How to Get Pre-Approved For a Mortgage

From Everything Finance

How to Get Pre-Approved For a Mortgage is a post originally published on: Everything Finance – Everything Finance – Its all about Money!

If you have decided that you want to buy a home, one of the first steps you should take before looking at listings or touring houses is to determine how much money you could be qualified to take out in a loan from a bank to purchase a home. Getting preapproved for a mortgage would be helpful for a few different reasons:

Get Preapproved for a Mortgage 1.  Budget for a Down Payment

The more money you can put down, the lower the interest rate and monthly payments will be. If you put down less than 20% of the home’s purchase price, you’ll have to pay for private mortgage insurance (PMI) on top of the cost of the home loan.

The type of mortgage you apply for will affect how much of a down payment you’ll need. For example, for most mortgages, you’ll need to put down 3% to 20%. But if you qualify for a Federal Housing Administration (FHA) loan, you can put down just 3.5%.

2.  Gather the Information You’ll Need

Here is a detailed look at what you need to know to assemble the information below and be ready for the pre-approval process:

• Income and Employment – A lender will only pre-approve you if they can prove that you have enough money to pay your mortgage every month. This involves ensuring you have a stable job. You can prove this to a loan officer by giving them the last two years of your W2s, tax returns, or your last two pay stubs.
• Proof of assets – A lender has to ensure that you have enough money in the bank for a down payment. These are your “assets” and you can prove that you have money for a down payment by a screenshot of your account. They typically request bank statements showing the last 60 days of transactions. 
• Good credit score – The lender will want to know if you will pay your mortgage on time. A credit report will help them determine if the mortgage lender trusts you enough to lend you a significant amount of money. A 580 credit score is the cut off for an FHA loan, while a 720 is the score you need to have the best rates from a traditional loan.
• Identification – The lender will need a passport or social security card, your driver’s license and your signature, stating you allow them to use this information to look up your credit report and create a pre-approval letter for you.

RELATED: How to Save Up a 20% Downpayment For a Home

3.  Comparison Lenders

It’s a good idea to compare offers from several different lenders to ensure you get the lowest mortgage rates. If you choose to get a mortgage pre-approval from a bank, you typically have to go into a bank branch. It also requires a hard credit inquiry, which can affect your credit score. You should get quotes from no less than three lenders and ideally from as many as possible. That way, you can ensure you’re getting the most favorable rates possible.’

One of the first steps to getting in to your new home is to be preapproved for a mortgage.
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4.  Submit Your Application

Once you have identified a lender offering the best loan terms, it’s time to actually submit your request for pre-approval. Some lenders allow you to submit a mortgage application online now, although some do require you to visit a local branch in person or to speak with a mortgage loan officer.

You’ll need to provide details about how much you want to borrow, as well as submitting the financial documentation that the lender asks for.

Closing

Have you been preapproved for a mortgage?That doesn’t mean you should use that amount as your house budget. Remember the more you borrow, the higher your mortgage payment and the more interest you’ll pay over time. A larger home could also mean more money spent on utilities, furnishings, decor, maintenance, property taxes, and insurance.

Another reason to avoid maxing out on your pre-approval is so you’ll be in a better position to pursue other financial goals, such as saving for retirement, building a college fund, and leaving room for future borrowings, such as a car payment.

How to Get Pre-Approved For a Mortgage is a post originally published on: Everything Finance – Everything Finance – Its all about Money!

This post was published on Everything Finance