How To Get Pre-Approved For A Home Loan
Before beginning your search for a home, you can use these simple steps to find out how to get pre-approved for a home loan. When you are pre-approved, you will know the amount the mortgage lender is willing to lend you. You can use that information to begin your search for a home in the price range that you can afford.
There is a difference between being pre-qualified and pre-approved. Being pre-qualified means your financial information has been given to the mortgage lender and the lender has agreed to give you a loan if your information checks out. The bank does not verify your information at this time. Loan pre-approval is a more lengthy process. Your financial information will be verified and mortgage lenders will give you approval for a certain amount or for specific programs. To get pre-approved for a home loan, you will be asked to fill out an application. Some mortgage lenders charge an application fee for processing your application.
- Find out your credit score. Buyers with good credit scores receive better interest rates. Review your credit score carefully. There may be errors on your credit report and you will have to contact the credit bureau to have the issue resolved. You can obtain your credit score on line for free at certain websites.
- Call different mortgage lenders, and banks to see what the charges are to fill out an application. Ask friends, relatives, and your realtor to recommend mortgage lenders if you do know one. Ask the mortgage lender about their interest rates and loan programs.
- Gather your financial information together to take with you when you have your meeting with the mortgage lender. You will need: Federal tax returns for the past two years. W-2 forms, or profit and loss statements, or corporate returns if you are self-employed. Proof of current income. Recent bank statement. Payment information for long-term debts like cars, child support. Additional income like second job, retirement benefits, alimony, and child support. Credit card debt. Depending on the lender, additional financial information may be required
- Make a budget and decide how much you are able to pay as a down payment and what monthly payment you are comfortable paying each month. The general rule of thumb is your monthly house payment and all of your expenses should not total more than 36% of your income.
- Make the appointment with your lender so you can begin the home loan approval process. If the documents meet with the lenders approval, the lender will provide you with the loan commitment information.
Tip: The lender may lock in the interest rate for a specific period of time while you are searching for your home. This is very helpful if the interest rates are rising.