The Quickest Way To Get Pre-Approved For A Mortgage
Congratulations! You've decided to start your journey into the wild world of real estate. But before you begin ogling the listings available in your desired neighborhood, there's some critical information you require first. In particular, you need to know exactly how much you can spend on a home. The last thing you want to do is fall in love with a $2 million estate when you should be looking for something far more realistic. Then, it's time to dig into your finances before heading to a lender to assist you in acquiring your dream home.
Unless you have access to a large sum of cash and can pay for a home outright, you'll likely need a loan. In most cases, this comes in the form of a mortgage which can be issued by a bank or other type of financial lender. However, before starting a loan application, you should check to see if you can be pre-approved for a mortgage. Essentially, a mortgage pre-approval takes a look at your current financial situation based on specific information that you supply and assesses how much you can afford to borrow, according to Bank of America. Although this borrowing amount can be negotiated and is certainly not a set-in-stone commitment, it's a valuable jumping-off point to begin your exciting search for a new home. However, to get a quick pre-approval, you'll need to provide documentation of your earning power, debt obligations, and more.
Prepare all your information to speed up the process
Before you apply for a mortgage pre-approval, you need to make sure that all of your documents are prepared. You should have copies of pay stubs from your employer to give the lender an idea of how much you are taking home every month. Ideally, this should include your earnings for the year preceding when you are ready to apply. According to Chase, you should also perform a recent credit check to see if your credit is in good standing. Next, calculate what your debt-to-income ratio is. This can be found by adding all your monthly payments towards loans (such as student loans, car loans, credit cards, and the like), then dividing it by your monthly gross income. If the percentage is 43% or lower, this could be favorable to you securing a loan.
Furthermore, you should have copies of the last few months of your bank statements to show the funds coming in and going out. Some financial institutions require records of your W-2 statements and income tax returns that go back several years. Lastly, if you have been able to save diligently for a sizable downpayment, this can also look appealing to potential lenders. Having all this ready for when you apply for a mortgage pre-approval can push the process along quickly as you will be adequately prepared with the required information and purchasing power.