How to Get Pre-Approved for a Mortgage

To get a pre-approved for a mortgage requires some but not all of the mortgage process to be completed. The idea is that the mortgage company will examine you as a mortgage candidate and determine how large of a mortgage they are willing to lend you. With the pre-approval letter in hand, you are able to make offers on homes some home buyers may not be able to. Certain foreclosures can only be bid on by owners who are pre-approved for a mortgage. Builders will not start building a home without at least a pre-approval letter.

Instructions

1. Gather all of your income documentation.

   This should include recent pay stubs, a copy of last year's tax returns, fulfilled and current contracts for self-employed income, and any other documentation that may help prove a pattern of your income. Sometime copies of checks will be sufficient. All mortgage quotes are based upon your income and your credit.

2. Get your free credit score.

   You are allowed a free credit score from each of the three credit agencies once a year. This will give you two things, a number to tell brokers so that you get an accurate mortgage quote, and details that may need repaired on your credit before securing a mortgage.

3. Call around to get mortgage quotes.

   You want to get pre-approval with a mortgage broker you would like to work with ideally. Calling around to find out mortgage rates is a good way to discover which mortgage broker you want. Since the mortgage percentage is the most important thing, look for the lowest rate on the type of mortgage you will be looking for both in terms of length, down payment, and points up front.

4. Be sure you have enough cash to close.

   Mortgage quotes will run sky high, or more likely, fail to be approved if you do not have enough cash to make a down payment and cover closing costs. For a residential purchase you will need 5% down plus another 2% or 3% to cover the closing costs such as assessment, title insurance, mortgage commission etc.

5. Schedule a meeting with a mortgage broker.

   The goal of this meeting is to find out their process for mortgage pre-approval. It will speed things up if you have documentation with you that can be put in their hands. Be prepared to give addresses and phone numbers for employer verification, your social security number, the exact amount of your debt burden, and the location of all of your liquid cash.

   * See more tips below on mortgage quotes and mortgage pre-approvals.

Tips & Warnings

• Be truthful with the mortgage broker at every level. Any failure to be up front will cause your mortgage application to be rejected and leave a mark on your credit.

• Decrease your debt to credit ratio by liquifying investments if necessary to show ability to pay.

• See related articles on this page for more help and information on mortgage pre-approval processes.

Resources

• When to Refinance Rule of Thumb
• Negotiate a Mortgage Refinance when You Lost Your Job