How to Get Mortgage Pre-Approval

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There is continuing argument whether or not obtaining a mortgage pre-approval is a good idea.  Even in this era of greater caution after the real estate market collapse a few years ago, there are proponents on both sides of the argument.

Opponents of the idea allege that a mortgage pre-approval is not the same thing as a mortgage contract.  Of course this is true, but it is an opportunity to fully vet a borrower’s financial situation before wasting time to find a home a borrower cannot afford.

Getting a mortgage pre-approval is accomplished in just a few logical, but essential steps.  It behooves both the borrower and the lender to do their due diligence in order to maximize the success of the effort.  It is always advantageous for a borrower to know what kind of a home is affordable to them before beginning the search to buy.

Here are three simple steps defining how to get a mortgage pre-approval:

Improve and maintain a good credit score

Your credit score is the first verification a lender will perform.  Nothing else matters if your score is deficient.  If you have a low credit score, you will either fail to obtain a mortgage, or you will be charged a high interest rate because you present a significant risk.

However, if your credit score is high, it indicates your solid history of paying bills when they are due, in the amount that is due, month after month.  It means that you should be an excellent borrowing.

If your credit score fails to impress, there are means to correct it.  It is worth investigating the score to make sure that it is based on correct information.  Occasionally, there are errors in the data that is used to compute your credit score.  If you have the documentation to prove the erroneous data, it is worth your time to have it corrected.

If the data is correct, your only recourse is going to be to delay the purchase while you work to improve your score.  Depending on your condition, this may take months or even years.  This is why protecting your credit score is so important.  Once it has been improved, it is essential to maintain that good score.

Prepare complete and accurate personal financial records

If your credit score is high, this is a good indication that you keep accurate financial records of your bills and taxes.  These records will need to be at hand to document your good history.

It will be beneficial if you can demonstrate records of keeping a monthly budget to show that you carefully control your income and expenses month by month.  The lender is offering a commodity – money – and they want to be assured that you are aware of its value and have tight control over its use.

You will need to gather your banking records to demonstrate your ability and commitment to control finances and that you work well with the financial institution with which you have entrusted your money.  If you are a careful manager of your money, a lender is going to be satisfied that you will be a good steward of their money.

Financial documents you will need to have on hand include at least two years of W-2′s, pay stubs for several months, federal and state tax returns (including business tax returns if self-employed) for at least two years, and statements of assets.

Research lenders and choose the best for your needs

Shopping for the right lender for your needs may be the most difficult task.  If you are a first-time homeowner, this search may be confusing and frustrating.

Relax, it is not as hard as it seems.  Like any other first-time effort, go slowly and carefully.  You might first inquire with the bank through which you currently conduct financial affairs.  This should not be your last stop, however, even if they demonstrate an interest in funding your mortgage.  Shop around to make sure you get the best deal you can find from a reputable institution.

You should talk to several banking institutions, but you should also speak with a mortgage broker or a company like Inzopa.  Inzopa or a broker will expand your search to several lending institutions, easing your burden.

They will want to know approximately how much you wish to borrow and how much you have available for a down payment.  Be as accurate as possible with these figures.

Final thought

If you approach the pre-approval process carefully with eyes open and aware, you should succeed in obtaining a mortgage pre-approval.

Looking to buy or refinance a home? Inzopa can help save you time and money.

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