How to get a mortgage pre-approval
When I applied for my first mortgage pre-approval, I had no clue as to what I was getting myself into. I just knew that I need a pre-approval letter from a bank before I could purchase the pre-construction condo I wanted. I thought this would be a simple process and that I could leave that same day with a pre-approval in my hand. I went through the process blindly.
A mortgage pre-approval is an official statement from the lender about what you are eligible to borrow. It’s a way for sellers to know that you are truly serious and can afford the property you want to buy. Here’s what you need to know about getting a mortgage pre-approval to help you save time when you’re house hunting:
Get all your documents in order
The good thing about the mortgage-preapproval process is that it gives you an opportunity to get everything together. This might be frustrating because you have to find all of your important documents (tax records, proof of income, and bank statements). Organize everything to speed up the process and show the lender where you stand.
Make sure your finances are where you want them to be
You don’t have to buy a home just because you landed your first well-paying job. You should work on getting your finances up to par. This might include paying off that debt, saving up a little more for a down payment, or taking that job offer in a different town. You definitely don’t want to go house hunting before you have a decent savings account. You should also be confident with all of your documents before you walk into the bank.
Find a stable source of income
The bank doesn’t care about your new dating app or that brilliant website idea you’ve been working on. They want to know that you have money coming in. They want to know that you have a stable source of income so that you can make your mortgage payments since they’re going to be loaning you a serious amount of capital. You also need to prove that your income is stable (letter from employer or pay slips).
Work on your credit score
The company that ultimately loans you the money wants to know that you’re reliable enough to make your payments. This is why they check your credit score. If you don’t have any credit or you damaged your credit score, you need to fix this issue before you get your mortgage pre-approval.
You don’t always need a mortgage pre-approval, but it’s good to know where you stand so that you don’t look at homes out of your reach. You can also see where your finances might fall short. This might be a perfect opportunity to finally get serious about your credit score or to start saving up more aggressively.