Speed up your mortgage pre-approval
Endless clicking through photo galleries. Making and fielding agents’ phone calls. Wandering through countless open houses.
Buying a home can be frustrating. And that frustration increases if you’re not sure what you can afford.
On this front, though, you have options. Getting a mortgage pre-approval can help you to shop smarter.
If you could speed up your pre-approval, the process would be even better, right? Before we list our strategies to expedite pre-approval, here’s a brief refresher first.
Pre-approval vs. pre-qualification
Getting pre-approved means your mortgage lenders will tell you the exact amount of loan you can get. But don’t confuse pre-approval with pre-qualification, another term commonly used in the home mortgage process.
Pre-qualification gives you a rough idea about your eligibility for a mortgage and the amount that you’ll be able to borrow. Mortgage lenders make this estimate based on an informal evaluation of your finances.
With pre-approval, the lenders pull up your credit report, review your financial history, your assets, liabilities, income, and more to give the exact estimate of your loan. Also, some sellers want to see a pre-approvalletter to check whether the buyer is serious.
Further, knowing your possible loan amount will help to calculate a monthly mortgage payment.
That’s why getting pre-approved is a necessary first step in the home buying process.
How can you boost your mortgage pre-approval?
While some mortgage lenders take a few hours to issue a pre-approval letter, some take several days. Receiving pre-approval faster largely depends on the financial information that you provide.
The lenders usually request:
- Proof of income
- Your detailed credit history
- Proof of all your assets
- Employment verification and
- Your identification (a photo I.D. such as a Passport or driver’s license)
Additionally, you may have to submit:
- Your W-2 or 1099 statements
- Pay stubs covering the last 30 days
- Two years of tax returns
- Bank statements
- Details regarding any additional income sources
Before approaching a lender, you can boost your chances of getting a pre-approval, and in turn, speed-up the process. Here’s how:
1. Set your credit report in order
Request your credit report from the credit bureaus and check for errors. Rectify the issues in your credit report before applying for a pre-approval. Lenders will give faster approval to those whose with credit reports free of any issues.
2. Maintain a healthy credit score
Strive to keep your credit score above 620. For faster pre-approvals, try to attain (and then maintain) a healthy credit score of 740 or above. The better your credit score, the lower your possible mortgage rates!
3. Act on your debt-to-income ratio
The debt-to-income (DTI) ratio determines your ability to repay loans. Lenders use the DTI ratio primarily for your mortgage eligibility, and your DTI must be 36% or below. If yours is on the higher side, try to reduce it by finding ways to increase your income while lowering your debt.
4. Go mortgage shopping
Compare mortgage lenders for rates and fees on a 15-year or 30-year home mortgage. As mortgage shopping for pre-approval does not affect the credit score, you can do it as often as you’d like in order to boost your pre-approval chances.
Make it work!
If your dream is to unlock the door to a new home, then you can make things work with a little patience and determination. Follow the above tips and you will be closer to a pre-approval letter (and maybe even one with a larger amount than you’d previously expected!) Once you have the letter in hand, you’ll be equipped to make smarter bids on your dream property.