Source : Open Listings (This article originally appeared on OpenListings.)
https://www.openlistings.com/blog/how-to-apply-for-a-mortgage/
Applying for a home loan is the first step to take when getting serious about buying a home. It will help you understand how much house you truly can afford. Get ready for the application process by gathering your financial info, finding a lender to work with, and getting pre-approved. You can always shop around and pick another lender once you get an accepted offer.
Mortgage loan pre-approval means approaching a lender with financial, credit, debt, and other information that will help them determine if you qualify for a loan at a certain amount.
There are four essential steps involved with mortgage pre-approval:
- Gather financial information
- Select a lender
- Get a mortgage pre-approval
- Close on your home
This article will give you an idea of how to get pre-approved for a mortgage and why pre-approval is important for buying a home.
How to get pre-approved for a home loan
Step 1: Gather financial information
Before heading to your lender’s office, gather and prepare the following financial information:
Credit Information: Your credit score and reports will determine the size of loan you may qualify for and the type of financing plan you will be offered. For example, a borrower with a credit score below 740 will usually have a higher interest rate associated with their loan. A borrower with a score below 580 will usually have to put down a higher down payment.
Pro Tip: Check your credit score for free with credit.com.
Debt Information: Gather and prepare any of your debt obligations. This includes student loans automobile loans, and credit card payments.
Pro Tip: If you have a significant amount of debt, the amount that you’re pre-approved will likely be smaller or rejected. Before applying for your pre-approved mortgage, try paying off your debts and minimize the number of new debts you take on.
Income Information: Gather and prepare income information from the previous two years. This includes tax returns, W-9s, pay stubs, and additional income information (from second jobs, overtime pay, social security payments, alimony or child support payments, etc.).
Asset Information: Asset information refers to assets you own other than your income. This involves gathering bank statements, property statements, investment information, and money received by family members.
Personal Information: Bring a personal ID such as a driver’s license or passport and your social security number to your lender’s office.
Employment Information: This includes your proof of employment and the length of time you’ve been with your employer.
Budget Information: Before going to see a lender, determine your budget for buying a new home.
Pro Tip: Your total housing payment budget should not exceed 35% of your pre-tax income. The ideal percentage is 25% of your pre-tax income.