How To Get Preapproved for a Mortgage
By Space Coast Daily // July 7, 2022
When you are looking for a new home, the last thing you want to do is find out that you can’t afford it. One way to avoid this is to get preapproved for a mortgage before you start shopping. Keep reading to learn the steps you need to take before the mortgage preapproval process begins.
Get your paperwork together.
Before you consider applying for a preapproval, you must get a few essential documents together. This includes your income verification, bank statements, and credit report. Lenders will want to see all this information to determine the main question: “How much mortgage can you afford?”
Income is verified with pay stubs, W2s, or tax returns. The lender will want to see how much money you earn each month and how long you have been employed at your current job. You will also need to provide bank statements from the past three months. The lender will look at these statements to make sure that you have enough savings to cover the down payment and closing costs on your new home. Other important documents you’ll need to locate include your social security card, tax documents, and your budget breakdown.
Check your credit score.
A credit score is a three-digit number that reflects your credit history and borrowing risk. It’s based on information in your credit report, such as how much you owe, how often you make payments on time, and how long you’ve had credit accounts open.
Your score falls into five categories: excellent, good, fair, poor, or bad. A high score means you’re a low-risk borrower who will likely be approved for a loan and get a low-interest rate. A low score means you’re a high-risk borrower who may not be approved for a loan or have to pay higher interest rates. Even if you’re not in the market for a new home, it’s crucial to check your credit score often and watch for potential fraud or identity theft. Fortunately, you can check your credit score for free. This website is the only place you can get a free copy of your credit report from each of the three national credit bureaus—Experian, Equifax, and TransUnion.
Shop around for the best mortgage rate.
Now that you have your credentials in order, it’s time to find the lowest possible mortgage rate. This typically takes a bit of time and research, so don’t be discouraged when you don’t find the best rate immediately. The lender will then use the paperwork you gathered to determine how much money they are willing to lend you. Also, remember that just because you’re preapproved for a certain amount doesn’t mean you have to borrow that much. You may want to purchase a less expensive home than what you’re initially approved for.
It’s important to compare interest rates when shopping for a mortgage. The lower the interest rate, the less money you will pay in total over the life of the loan. Be sure to ask about all the fees associated with the loan so that you can accurately compare rates. Your potential lender will help you decide which type of mortgage is best for you. There are many different types of mortgages available, so be sure to research them before deciding.
Being preapproved for a mortgage gives you a better idea of what you can afford and also shows the seller that you are serious about buying the home. Remember that preapproved does not mean you’ve applied for a mortgage; it simply means a lender is willing to lend to you. Your final approval will depend on the property’s value and your ability to repay the loan. However, once you’ve begun the preapproval process, the rest of the home buying process should feel less daunting.
Getting preapproved for a mortgage is an important step in the home buying process. It shows you’re a serious buyer, gives you an estimate of how much you can afford, and helps you move through the buying process more quickly.