Why is getting pre-approved for a mortgage so important? Mortgage pre-approval means a lender has reviewed your finances and, based on factors like your income, debt, and credit history, determining how much you’re qualified to borrow.
Being pre-approved for a mortgage can give you clarity while planning your homebuying budget, confidence in your ability to secure a loan, and a competitive edge in a bidding war. Your real estate agent is there to help you with the process. He or she can explain the types of mortgages, the risks, and benefits of different types of financing, location, features, and price range, and tax issues and responsibilities of a homeowner. Even if this is your first or second time buying a home, you still need to ask as many questions as you can. The options available to you when you first bought your home may not be the same this time.
In today’s market, connecting with a lender to get pre-approved may be the game-changer that helps you secure your dream home. If you want to get pre-approved for a mortgage, make sure to follow these four steps:
1. Down payment
2. Gather financial information
3. Comparison shop with lenders
4. Pre-approval factors
Budget for a Down Payment
The more money you can put down, the lower the interest rate and monthly payments will be. If you put down less than 20% of the home’s purchase price, you’ll have to pay for private mortgage insurance (PMI) on top of the cost of the home loan.
Gather your Financial Information
Depending on where you get your pre-approval letter, mortgage lenders require you to upload your financial documents.
Here’s some of the information you should have ready:
• Proof of income: Such as pay stubs or W-2 forms
• Federal income tax returns: Your tax returns for the past two years
• Bank and investment account statements: Statements that show your current balances and contributions
• Driver’s license or passport: Some form of identification
• Debt statements: Any outstanding debt statements that show your remaining balance and monthly payment
Comparison Shop with Lenders
It’s a good idea to compare offers from several different lenders to ensure you get the lowest mortgage rates. If you choose to get a mortgage pre-approval from a bank, you typically have to go into a bank branch.
Factors that May Impact Pre-Approval
Your pre-approval is dependent on several factors, such as your:
• Assets/Down payment
• Debt
• Credit score
• Employment history
• Income
Between your pre-approval and your loan application, pay off the debt if possible. Running up credit card debt or taking out a loan could negatively affect your credit score and debt-to-income ratio, reducing how much you can borrow in the form of a mortgage. It’s also a good idea to ensure your income remains the same.
Your credit score is largely determined by your payment history, as well. Make sure you make all of your payments on time during the entire mortgage process.
Benefits of Pre-Approval
• It gives you clarity when determining your homebuying budget
• Your offer is more desirable and has a competitive edge in a bidding war
• You can be more confident in your ability to secure a loan
In today’s competitive market, connecting with a lender to get pre-approved may be the game-changer that helps you secure your dream home. Talk to a real estate agent at Wenzel Select Properties today!
Wenzel Select Properties offers expert real estate assistance tailored to meet its customer’s unique needs. When you are buying a home, we thrive on finding you the perfect home and mortgage lender to assist you with financing your home. Whether you are looking to buy a one-bedroom condo in downtown Chicago or purchase a single-family home in the suburbs, Wenzel Select Properties looks forward to offering you superior real estate expertise and unparalleled customer service.
The future location for Wenzel Select Properties is 4941 Main Street in Downers Grove, Illinois. Our real estate office is in the heart of downtown Downers Grove. We are just minutes away from Interstates 88, 355, 55, 290, and 294. Wenzel Select Properties real estate brokers are available to meet with you 7 days a week – Monday through Sunday. You can call us for an appointment at (630) 430-4790.