If you’re thinking of buying a house, there’s one thing you need to do before anything else and that is to look for a lender and file for a mortgage application. This process can be gruesome and time-consuming, but it’s definitely something worth going through, especially if it means getting the house of your dreams. And, speaking of getting the house of your dreams, you know what can make that happen better for you? A pre-approval! With pre-approval, you can choose your next home more freely. Here’s how you can get pre-approved for a home loan.
- Get your proof of income ready - one of the biggest and most important things lenders want to know before handing out pre-approvals is whether the applicant can handle paying off the mortgage. They want to make sure that you’re earning enough to make the payments and still live on a decent budget. You’ll need to prepare your W-2 wage statements and tax returns from the past couple of years, your current pay slips that show your current and year-to-date income, and other proofs of income like bonuses and alimony, if any.
- Show your proof of assets - another thing that you need to present to a mortgage lender is your proof of assets. This shows the lender that you have the funds required to pay the down payment on the home you choose to buy as well as the funds to buy PMI or private mortgage insurance which most lenders require.
- Have a good credit score - having a good credit score will not only score you great deals and better perks from banks, but it can also help you get pre-approved for a home loan from your mortgage lender. Most lenders require a FICO credit score of at least 620 to get pre-approval. A higher score can get you better interest rates. So, if you still haven’t done it yet, make sure to start fixing up that credit score.
- Get verified by your employer - having a stable job (aka a stable source of income) shows the lender that you are capable of making the payments on the loan you’re about to take out. They may need to verify your employment so it might be a good idea to give your employer a heads-up about it. And if you think that this process would be easier if you were self-employed, think again. Lenders want to make sure the borrowers have a steady source of income so self-employed borrowers may have a harder time proving that.
A pre-approval is a hard inquiry and not everyone is privileged to get one. If you prepare for the process and provide all the necessary documents to your lender, though, you might just increase your chances!