Getting pre approved for a mortgage is an important first step in buying a home. It gives you peace of mind knowing that you’re ready to buy when the right house comes along. Knowing that most people need to finance their home purchase, my mortgage broker, Mike Angus from Midwest Equity Mortgage and I recommend the following steps for getting pre approved for your mortgage.
Pre Approval Step #1: Select the lender you’d like to work with
After reading my post on 5 Tips for Finding a Mortgage Lender, and talking to at least three lenders, select the one you’d like to work with. Remember, they should be willing and excited to educate you on the process, communicate well and often, and be interested in finding you the best solution for your situation.
Pre Approval Step #2: Submit your application
Your lender will provide you with a secure, password protected platform to submit critical information and documentation regarding your finances. This information ranges from simple personal information like your name, home address, social security number etc, to recent pay stubs, investment statements, bank account statements, etc. This documentation will help your loan officer figure out how strong a borrower you are likely to be. It will also give them an opportunity to run a credit check. You’ll authorize your lender to run a credit check so they can get the most accurate picture of your personal financial situation.
Pre Approval Step #3: Discuss various options with your lender
You will then find out what kind of loan you’re eligible for. There are three main categories of loans available: fixed rate mortgages, adjustable rate mortgages (ARMs), and home equity lines of credit (HELOC). Each has its own advantages and disadvantages. HELOCs are a form of second mortgages, so don’t worry about this if you don’t already own a home.
Within these products, there are many different types of loan products that you could qualify for. It’s important to do the best you can to be a strong borrower. This means having a solid credit history, a high credit score, and some reserves saved on top of your down payment. If you have these in place, you’ll be able to qualify for more kinds of loans at a competitive rate.
Pre Approval Step #4: Review the options further
Once you know what type of loan you want, you will need to determine how much money you can comfortably borrow. This is called “getting prequalified.” To do so, use an online calculator such as Lending Tree’s Home Affordability Calculator or their Mortgage Calculator. It will help you figure out how much you can afford based on your income, debt, and other financial obligations.
Step #5: Pay attention to your monthly payment
You should also calculate your monthly payments using a Mortgage Calculator. This will give you a better idea of how much house you can actually afford. If you find yourself struggling with the numbers, talk to a lender who can explain the process to you. Your loan officer will work with you to find the right home loan for your needs. They will also provide you with an estimate of how much you can afford based on your income and other financial obligations.
Step #6: Select your loan product
Work with your lender to select the loan product that best fits your needs. There may be some creative solutions that will allow you to get the most out of your loan product. Don’t be afraid to share any challenges you’re facing or questions you have. A great lender can help you through these questions so you’ll feel confident in making your final decision.
Step #7: Submit any additional paperwork needed
I like to create secure digital folders of the information that I’ll need so I can keep track of all documents I’ve submitted and if any new documentation requests come up. Be sure to keep your passwords to your accounts in a safe place, better if they’re kept through an encrypted account like Keeper or Last Pass.
Step #8: Receive your approval letter
Once you’ve gone through all the steps, you should receive your pre approval letter within a few days. You are now ready to start looking for your dream home! Remember, if you need help clarifying what kind of home you’d like and what features are most important to you, check out my Map Out Your Dream Home Workbook at growinghomela.com/map
2 Comments on Getting Pre Approved for a Mortgage