Before you start shopping for a house, you will need to know how much you can spend on your new home; you’ll need to be pre-approved for a mortgage. Your mortgage consultant will order your credit report and you’ll submit financial documents (paycheck stubs, W2s, bank statements, etc.) so your price range and optimal mortgage program can be determined.
Here are a few steps you can take to get pre-approved:
- Get your free credit score
- It’s best to know where you stand in terms of credit. Any credit scores higher than 620 will qualify you for better rates. Most borrowers with scores of 740 or higher will qualify for the best mortgage rates.
- It’s best to know where you stand in terms of credit. Any credit scores higher than 620 will qualify you for better rates. Most borrowers with scores of 740 or higher will qualify for the best mortgage rates.
- Check your credit history
- Request copies of your credit reports and file a dispute if you encounter any errors. If there are any delinquent accounts on your report, remediate them with creditors before applying.
- Request copies of your credit reports and file a dispute if you encounter any errors. If there are any delinquent accounts on your report, remediate them with creditors before applying.
- Calculate your debt-to-income ratio
- The percentage of gross monthly income that goes toward debt payments is called your Debt-to-Income Ratio (DTI.) This includes credit cards, student loans, car loans, etc. This debt-to-income ratio calculator can help you estimate your DTI based on current debts and a prospective mortgage. Typically, lenders prefer borrowers with a DTI below 36 percent – including the mortgage – though in some cases, it can be higher.
- The percentage of gross monthly income that goes toward debt payments is called your Debt-to-Income Ratio (DTI.) This includes credit cards, student loans, car loans, etc. This debt-to-income ratio calculator can help you estimate your DTI based on current debts and a prospective mortgage. Typically, lenders prefer borrowers with a DTI below 36 percent – including the mortgage – though in some cases, it can be higher.
- Gather personal information including finances and income
- Current address, employment details, Social Security numbers, etc. are all considered personal information. Additionally, you will need proof of income and bank/investment account information. During pre-approval, you’ll likely have to submit your W-2 tax form or 1099s if you have additional income sources and pay stubs. Two years of continuous employment is preferred; however, there are exceptions. Self-employed applicants will likely have to provide two years of income tax returns. If you are opting to use gifted money or the sale of an asset toward the down payment, you’ll need a paper trail to prove it.
Ready to get pre-approved?
Give Dan a call at 517-304-3669 to learn more about getting pre-approved for your mortgage, click the “First Time Home Buyer Guide” tab on our website: www.concordmortgageinc.com