How to Get Preapproved for a Mortgage

Pre-qualified means a mortgage lender has made a prior review of the documents you have provided when seeking a home loan and is confident you will qualify for a mortgage if you decide to apply for it. On the other hand, pre-approval is a more sophisticated step that emerges from pre-qualified. Pre-approvals are backed by double verification by the firm intending to offer credit. Lenders consider a pre-approval letter more reliable than a pre-qualified letter.

How to Get Pre-Qualified and Pre-Approved for a Loan

If you want a home loan, then there are some requirements you will have to meet before lenders can extend credit to you. Remember, the mortgage providers are here for a business and won’t give you their money if they are uncertain you can pay back. But that doesn’t have to worry you! With a good plan, you can always be sure of getting a mortgage anytime you need it. So, here is how to get pre-qualified for a home loan.

  1. Have an Active Bank Account

Lenders will want to see your bank statements for the last three to six months. Banks and other credit providers want to evaluate your income, spending, and ability to service the loan you have applied for. Besides, the account information informs lenders how long you have earned a salary and if there has been a progressive increase or decrease in your income. For lenders to accord you credit;

  • Your account must have been active for more than six months,
  • The account balance shouldn’t be negative,
  • Raise your income, and
  • Ensure you don’t have substantial outstanding debts.
  1. Credit Score

A favourable credit score report is one of the best ways to get pre-qualified for a home loan. Credit score reports tell of how well you manage your debts. Therefore, you must keep your credit score positive. Some strategies you can apply to ensure your credit score remains positive to include the following;

  • Servicing your debts before the due date.
  • Reduce the number of times you seek new credit.
  • Consolidate your debts.
  • Have an emergency fund through savings. It will cushion you against the risks of your inability to pay.
  • Avoid exceeding your credit limits on cards and credit lines.
  • Keep your spending in check.
  1. Maintain a Good Debt-to-Income Ratio

Lenders are interested in borrowers with a low debt-to-income ratio. In fact, most lenders won’t extend credit to you if your debt-to-income ratio is 43% and above. As such, you must devise new ways to increase your income and find ways to lower your debts. Again, remember no lender want to take all your income and leave you with nothing since that would mean an inability to pay your debts in the future. If you have an appropriate debt-to-income ratio, you will likely find several mortgage providers willing to offer you credit facilities to own a home.

  1. Plan Your Paperwork

When seeking a loan from lending institutions, you will be required to provide certain documents, and it is always essential to ensure you have them ready. Some key documents include an ID card, employer details, proof of current address, tax compliance, etc. To guarantee pre-qualification, keep these records updated and positive. Remember, a criminal record or indications of not paying taxes could make most lenders shy away from extending a home credit to you.

  1. Down Payment

Most lenders will require about 3% of the total mortgage value when seeking a home loan. However, you are not limited to that as a buyer and could pay a higher down payment. If your down payment goes beyond 20%, you will not be required to pay for insurance, and your rates could decrease. A down payment is essential for lenders because it shows commitment to buying a house or a home. It also indicates your ability to save, which means you can comfortably repay the loan.

  1. Find a Mortgage Firm that is Ready to Pre-Qualify You

Most mortgage companies offer home loan pre-qualification without charges and devoid of any obligations to apply for the mortgage with them. All you need to do is visit a mortgage lender’s website and apply for pre-qualification. Getting pre-qualified is crucial, as you might miss out on buying a home without it.

  1. Find a Firm to Pre-approve Your Home Loan

Just like in the case of pre-qualified, you will need to find a mortgage firm willing to provide a pre-approval for your home loan. Unlike in the pre-qualification stage, here you might be required to pay some charges depending on the lender. Besides, there will be many other requirements before you can get pre-approved.

The Difference in Application for Pre-Qualification and Pre-Approval

Although the two use almost the same approach when applying, they differ in each requirement, as you will sell below. Pre-approval has more must-do things than pre-qualification.

Pre-QualificationPre-Approval
Fill out a mortgage request applicationNoYes
Application feeFreeMaybe charged
Credit history checkNot RequiredRequired
Does is review borrowers financesNoYes
Estimation for down-payment amountNoYes
Do lenders give an estimate of specific loan amountNoYes
Is the interest rate information provided by the lenderNoYes
Is loan amount given by the lenderNoYes

If you’re looking for information on how to get pre-approved for a home loan, there you have it!

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