How to get pre-approved for a mortgage in 2020
If you want to get rid of stress get a mortgage, getting pre-approved for a mortgage is the way to go.
Since studies show that 40% of mortgage buyers find the home buying experience stressful, another 33% say the experience makes them cry, it’s amazing that more homebuyers don’t get pre-approved for a mortgage first.
Basically, a pre-approved mortgage letter is an offer from a specific mortgage lender to lend you money for the purchase of a house, under specific conditions and within a specific period of time (for example, 90 days). ).
A mortgage pre-approval is not the same as a mortgage pre-qualification.
A pre-qualification is much more informal than a pre-approval. It lets the mortgage lender know that you meet the minimum requirements for a mortgage, but does not include an offer for that loan.
Benefits of mortgage pre-approval
What can a pre-approved mortgage do for you? The best question is what can’t he do? Consider these benefits of having a mortgage lender pre-approved for a home loan:
- It tells sellers, realtors, and most importantly, lenders, how much you can afford. This gives everyone a clearer picture of a buyer’s commitment and ability to cover the cost of buying a home.
- It attracts the attention of sellers in a tight auction situation. In a tough bidding negotiation, the winner is often the one who got the mortgage pre-approved.
- Your final mortgage approval and delivery of your payments go much easier and faster if you are pre-approved, as most of the necessary paperwork is already completed.
What you’ll need to get a pre-approved mortgage
In this regard, getting pre-approved for a mortgage, especially if you are a first-time buyer who needs all the perks it can get, is a big plus for buyers.
Start this process with the following preparation steps:
1. Get a free credit report
There is no doubt that the higher your credit score, the better your chances of getting a mortgage pre-approved. This is why you will need to check your credit score first before going to a mortgage lender.
Evolve that process with a free credit score report from the three major credit rating agencies – TransUnion (UTR) – Get the TransUnion report, Experiential (EXPGIE) , and Equifax (EFX) – Get the report from Equifax Inc.. You can get a free copy of your everyone’s credit report by going to their websites and taking advantage of their free credit report offer once a year. Or, you can get them by going to AnnualCreditReport.com
2. Check your report carefully
Once you get your free credit report, check the document for errors or inaccuracies, and make sure you pay off any unpaid debts that are hurting your credit score. In real life, this process could take months, given the limited budgets of most American households.
This is exactly why you should start your mortgage pre-approval process at least six months before contacting a lender. You may need some time to get your household finances in order to qualify for mortgage pre-approval.
Note – as long as you limit your mortgage lender activity (including writing an application) to 30 days, soliciting multiple mortgage lenders will not hurt your credit score.)
3. Tidy up the necessary documents
You will need several financial documents to get pre-approved for a mortgage. This list includes the following:
- Your social security number. This includes both digits if you are buying a home with a spouse or partner.
- Your banking and investment records (aim for two years of account history.)
- Your tax records, including your W-2 tax form and 1099 forms if you earned additional income. Again, two years of tax records should be enough.
- Your employment history. While your tax and banking records should provide proof of income earned on the job, having pay stubs or a documented letter from your employer certifying your work history can help. If you are among the growing ranks of the independent nation of self-employed people, your tax records will need to serve as documented proof of employment.
4. Contact mortgage lenders
It is a good idea to extend to several mortgage lenders to obtain pre-approval.
A little homework will also tell you about quality traditional mortgage lenders and digital lenders. Adding a local lender to the mix is also a wise move, as a local mortgage company is usually more than willing to work with you to secure a good mortgage deal.
When you start kicking the tires of mortgage lenders, check interest rate, fees and customer service reviews.
Rates and fees are available on the lender’s website and on mortgage platforms like Quicken Loans and Lending Tree (TREE) – Get the LendingTree, Inc. report, who compare several mortgage lenders for you, as well as the rates. Customer reviews can be found on similar sites like Zillow.com (ZG) – Get the Class A report from Zillow Group, Inc. and Credit Karma.
Once you have a mortgage lender in mind …
Okay, you’ve found a mortgage lender that you like, and think you can work with, go ahead and get pre-approved. Your lender will respond to you by asking you to complete an application and include the following personal documents.
- A credit report that includes your FICO score and credit history.
- A legal form of personal identification, such as a driver’s license, birth certificate, or passport.
- Two years of personal or family tax returns.
- Two recent pay stubs. Also, expect to be asked for two months of bank statements, to show recent income history.
- All the assets in your household, including investment funds, retirement savings, moonlighting income, pensions and annuities.
What happens next?
Once delivered, the mortgage lender will review your documents and accept or reject your mortgage pre-approval request.
If you get a green light, your lender will issue a pre-approval letter, which you can show to potential sellers and real estate agents, demonstrating that you are a serious buyer with money on hand.
With your mortgage pre-approved in your back pocket, you can go ahead and search for a home to buy. Once you find the one you like, you will complete a mortgage application.
This is a standard form, officially known as a Uniform Residential Loan Application (URI), or Fannie Mae trains 1003.
The loan application lists the following requirements that you will need to meet, including:
Your mortgage and the terms of your loan. Indicate the type of mortgage you are applying for (i.e. conventional loan, VA loan or FHA loan, for example.)
Information on the property and purpose of the loan. (For example, it could be a general purchase loan or a refinance loan.)
Job information. If you are buying the house with a spouse or partner, you will need to include employment information for both of you, if applicable.
Monthly household income. This includes salary income, workplace bonuses and commissions, rental income, retirement or investment income, as well as child support and alimony, both of which are optional.
Assets and liabilities. All of your personal property, in total, and all of your debts, in total.
Transaction Information. This includes how the house will be paid for and any closing costs attached to the seller and the buyer.
Things to remember about mortgage pre-approval
With your mortgage already pre-approved, you’ll likely have a clear path to mortgage approval, and you can start negotiating with the seller on a closing date and formalizing all the paperwork you will need with the seller, everything. real estate agent or broker involved, state and local government, and attorney fees, if applicable.
After that, you are ready to move into your new home.