How to Obtain Preapproval for a Mortgage
If you are planning on purchasing a new home, you can get a mortgage pre-approval before shopping. Getting pre-approved for a mortgage is different than pre-qualifying as pre-qualification does not take into account as many things as a pre-approval does, including debt to income ratio. To obtain a pre-approval for a mortgage, you can make sure that your credit and finances are in good financial shape before filling out your pre-approval application.
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Instructions
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Pull copies of your credit report and get scores from each of the credit bureaus. True Credit and Identity Guard offer reports and scores from all three credit bureaus in one report. As of January 2010, there is a 30-day free trial for each company, which means you won't have to pay anything if you cancel before the 30 days is up. Otherwise, the monthly fee is $14.95 for True Credit and $14.99 for Identity Guard.
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Review your credit reports for any errors. If there are errors, contact the credit bureau through the method listed on your credit report to get the errors corrected. Also look at your credit scores to see what they are. The minimum you will need is 650 but you can get some of the best rates if you are at or above 760.
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Keep a down payment in the bank. The mortgage company will check your finances and want to be able to see that you have enough money in the back to put down on the home that you are interested in purchasing.
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Try to lower your debt to income ratio if you can. The debt to income ratio looks at how much money you have to pay out to debt each month in comparison to how much you earn. To lower this, you need to pay down some debt or earn more money each month.
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Give the mortgage company proof of your income with paycheck stubs or last year's tax documents. Typically your annual income should equal close to 30 percent of the mortgage amount.
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Ask your mortgage company for a full list of required documents for pre-approval. Fill out the pre-approval application with your mortgage company once you feel you can meet all of the requirements. Information that you need to enter includes employment history, income, assets, credit history and expenses.
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Tips & Warnings
Pre-approval is typically only valid for a set time, which varies by lender.
Some mortgage companies charge a fee for a pre-approval, which varies by lender.
