A house is not just a structure. It is a representation of our lifelong dreams, which is to have a place of our own. A home, our own piece of heaven, is where we can just be ourselves and enjoy our own company. For someone who wants to have a family or for one who already has, he will want to buy a property where he can build his dream house. This is where he’ll bring his family and create lasting memories.
So, buying a house is really on our list of things to do before we die. But even though we really want to get our desired property, it’s difficult for most of us because we just do not have the financial resources to do so. Hence, we apply for a mortgage, which, at times, does not go too well. Yet there’s no harm in trying; and it’s actually a good idea to try to apply for one. Who knows? Maybe you’ll get approved.
Why Apply for Pre-Approval
Have you ever gone house hunting with no idea about how much your budget is? Isn’t that hard? You’re looking at houses, you see a place you like, and then you realize that you can’t afford it. So, you search available properties again. This can take a lot of time, which is why it’s always a good idea to apply for pre-approval.
If you apply for mortgage pre-approval, the lender or financial institution that you approached inspects all relevant documents, including your FICO or credit score. In case the loan officer is satisfied with what you presented, the lender will tell you that he will more or less approve your mortgage application. Then, he will inform you of the amount that he is willing to lend, as well as the possible interest rate. Because you’ll have a good idea about how much money you’re going to get, you can shop for a house that’s within your budget. Furthermore, since you know the interest rate, you’ll be able to plan future earnings and expenditures.
Your Financial Biography
You have to give lenders evidence that you will be able to pay the monthly mortgage fee plus the interest, in addition to the down payment. Hence, you need to present documents that show the status of your finances.
Here are a few things that you have to prepare:
1. Credit Report
The credit report provides a summary about whether or not you’re a good payer. Before, a score of 660 was okay. Now, you need to have a score of 680 or higher. You’ll have the best chance of getting a positive review if your score is 760 or more.
Where can I get my credit report? Ask your bank if you need a copy. You can also go online and get your score from True Credit or Identity Guard. These are credit bureaus that typically charge a fee for those who request for their credit scores.
2. Tax Returns
Make sure that you have a copy of your tax returns going back 2 to 3 years. Present these to the loan officer with the other documents.
3. Wages and other Earnings
Have papers that show how much your salary is (paystub) or how much your business earnings are (in case you also own a business). If you have stocks or bonds, provide copies of your stocks and bonds statements as well.
You will also need to provide data about your monthly expenditures. This includes payment for car loans, alimony or child support, credit card balance, and other expenses that you need to pay for each month.
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Claire Mann is a freelance writer who specializes in issues regarding real estate and home improvement. She provides material for online companies, as well as Ventura real estate agents.