Buying a home can be exciting and fun, but serious home buyers need to start the process at the lender’s office, not in an open house. Can I get pre approved for a mortgage?
Potential buyers benefit in several ways by consulting the lender and obtaining a pre-approval letter. First, they have the opportunity to discuss loan options and budgets with the lender. Secondly, the lender will check the buyer’s credit and discover any problems. The buyer will also learn about the maximum amount that he can borrow, which will help determine the price range.
When to get pre-approved
Letters prior to mortgage approval are usually valid for 60 to 90 days. Lenders provide the expiration date of these letters because your finances and credit profile may change. After your initial approval has expired, you must complete a new mortgage application and submit updated documents to receive another one.
If you’re just beginning to think about buying a home and suspect you may be having difficulty getting a mortgage, going through the initial approval process can help you identify your credit problems – and give you time to resolve them. Seeking initial approval six months to one year before a major home search gives you a stronger position to improve your overall credit profile. You’ll also have more time to save money on your down payment and closing costs.
Steps to obtain initial approval for a mortgage
- Get a free credit rating. Find out where you stand before reaching the lender.
- Check your credit history. Ask for copies of credit reports and question any errors.
- Calculate the debt-to-income ratio. Your debt-to-income ratio (DTI) is a percentage of your gross monthly income to pay off debt, including credit cards, student loans, and car loans.
- Collect income, financial account and personal data. This includes social security numbers, current addresses and employment details for you and your borrower, if you have one.
- Contact more than one lender. You may find that one lender makes it easier to apply for initial approval online, while the local lender can work with you to remove barriers to your consent.
In addition to providing documentation, you must also agree to check your creditworthiness. The lender will carry out a hard inquiry that may affect your credit standing.
Check your credit report before submitting your initial mortgage approval. You are entitled to a free copy from each of the major credit bureaus every 12 months.