It is advisable to apply for a pre-approval for a home loan before beginning the process of searching for a house to buy. Before-approval gives you a written statement from a lender showing the amount up to which you are approved for a mortgage. This places you in a much better bargaining power that is you can be making offers and bargaining as a buyer. Below is the process of obtaining pre-approval of mortgage.
Do Your Research Research with lenders and mortgage brokers to determine the various loan products that are out there in the market. Some questions one should ask include; What are the current interest rates, down payments, mortgage insurance and eligibility? It is important to know what kind of home price range you can afford according to your current financial status. This will help you to identify your preferred house.
Before checking your credit: Fix Your Credit When applying for pre-approval, your credit report and score will be scrutinized by the lenders. Check your credit files with the three credit reporting agencies. The more mistakes that you will find that you do not want to challenge, the more you need to improve your score. Timely repayment of all the bills for the next time. Reduce balances on credit card and loans as much as possible. Avoid applying for more credit before applying for a mortgage. The following steps can assist in raising the score.
Gather Your Financial Paperwork This is the case because when pre-approving you, the lenders will need to look at your income, savings, investments, debts as well as assets. Gather copies of your pay stubs and your W-2 and tax return forms of the past two years. Ensure that you have bank statements that will show the amount of money that you have saved to fund the business. List all outstanding debts and their monthly payments. Organise this financial documentation to provide to the lenders without much trouble.
Submit Your Mortgage Application Select the lender you wish to deal with and apply for mortgage pre-approval. Expect to make a payment for the application as well. You will be required to provide the lender with specific information about your job, earnings, spending, balances, and credit history. Provide this accurately. Find out whether the lender requires any other documents from you to validate the particulars that are in your application. Inquire about the time taken from pre-approval processes.
Get Your Documents Evaluated The lender will then review all the financial documents that you provided to determine whether you are capable of making the monthly payments on the mortgage. They will also ask for an assessment of any large security that the borrower intends to use to secure the loan. The lender will look at the total amount of money that you spend every month in paying your debts and that of the monthly instalments that you can afford in paying the mortgage. Remain in contact to avail any other required information as and when required.
Obtain Your Pre-approval Letter The lender sends you a pre-approval letter to inform you that after checking your financial situation, they believe you can qualify for a mortgage. This letter will highlight some details such as the actual amount and type of loan you are eligible for, the loan program either conventional of FHA, any conditions of the pre-approval among others. Ensure all information input is correct.
Always Look for Homes That Are in Your Price Range Using the pre-approval letter, one can now search for homes which are listed in your approximate price range. This letter proves to sellers that you are a serious buyer who has his or her financial back in place. It provides you with bargaining power in order to respond to favorite listings and negotiate firmly. Stick with homes you can afford and that is according to the amount of loan you have been pre-approved for.
Find the Right Property When choosing homes, make sure that you assess how each home is suited to your needs and desire as you go around. Features, layout, upgrades, school, commute and neighborhood are vital factors when making a decision. It is important to spend some time and try to see how life would be like in the property. Stick to the ones that give a home like feeling and have most of the items on your checklist within the acceptable price range.
Make an Offer After securing the right home based on your budget and lifestyle requirements, do not hesitate to make an offer for the house to avoid it being taken by another buyer. Include the pre-approval letter with your offer to the sellers. This will show a lender that you have the ability to afford the home financially. Bid your best price to give yourself an edge over other bids that don’t have pre-approvals.
Finalize Mortgage Details If the sellers agree to your offer, then you just need to work out the mortgage with the lender that already pre-approved you. They will show you the next requirements. This can be much smoother since you have already done your upfront work. Provide any other documents that may be required before the case is closed. Complete loan processing tasks. Your pre-approval means you have done everything right to get your mortgage approval in the future!
Pre-approval is one of the best preliminary measures to undertake when planning to purchase a home. It shows that there are many people willing to give you credit up to a predetermined amount. You can use this to shop confidently while already situated to quickly make offers and negotiate well with sellers who are motivated. Here is how you can go about getting yourself pre-qualified so that you can purchase your dream home:
