What Does It Take to Get Pre-Approved for a Mortgage?
Mortgage pre-approvals outline how much you can afford to spend on a home loan before searching for properties. Pre-approvals include information such as the interest rate, payment and closing costs on mortgages. Not everyone who applies for a mortgage will get a pre-approval. Learn what it takes to get pre-approved for a home loan to avoid a rejection.
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Improve Credit History
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Mortgage lenders review your application and pull your credit history before issuing pre-approvals. Factors lenders take into consideration include how well you manage debt and your credit score. Good credit management includes timely bill payments and few outstanding debts. Credit score minimums vary, but a safe range for pre-approvals is 680 or higher. Higher credit scores often result in lower down payments and better mortgage rates.
Income Statements
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The ability to provide proof of income is another requirement for mortgage pre-approvals. Lenders need to check your employment and yearly income to see if you can afford a mortgage. Documentations of your income include Forms W-2, paycheck stubs or tax returns -- two years of tax returns if you are self-employed. A letter from your employer can also serve as proof of employment and income.
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Shopping Around
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You can talk with more than one lender when seeking a home loan pre-approval. Shopping around is the best way to compare different mortgage lenders and get the best rate and terms on a home loan. Get quotes by contacting two or three lenders on your own, or use a mortgage broker to compile loan quotes and pre-approvals on your behalf. Brokers have knowledge of multiple loan products and lenders, and they can help you find a mortgage that suits your needs.
Advance Preparation
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Getting pre-approved is the first step to getting a home loan. Closing on the mortgage loan, which involves signing the loan documentations and receiving the keys to your new property, will involve paying a down payment and closing costs on the loan. Prepare for these expenses in advance to avoid delaying the mortgage process. Plan to put down at least 5 percent of the sale price, and pay between 3 and 5 percent in closing fees.
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References
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