How First Time Home Buyers Get Pre-Approved for a Mortgage Today

#1 Verify Your Credit Score

Before you do anything else, such as contact a lender, get a copy of your credit report online. See what your score is, and check for any mistakes that are affecting your score. At least 20% of consumers have mistakes on their credit reports. Some of those mistakes could lower your score. For example, a negative item could be erroneously reported twice. Or, someone might have opened a credit card in your name and damaged your credit. If you find anything that you think is a mistake, you can dispute it with the credit bureau. If you have not yet established credit, consider a home loan with no credit score required,

#2 Collect Your Income Information

Be ready to supply the lender with your pay stubs, two years of tax returns and W-2s for the past two years. You also should collect any information that shows income from other sources, such as a second job, overtime, commissions, Social Security income, alimony, etc. If you are self-employed, you should show two years of tax returns and a current profit and loss statement for the year to date.

#3 Organize Your Asset Information

The mortgage lender will want to see any other assets you have besides your income. This can include your bank statements, 401k and IRA statements, and any other assets you own, such as real estate. If your relative is going to provide you with cash for a down payment, you should get a gift letter from them stating this is a gift and is not a loan.

#4 Collect Your Personal Information

You need to have official ID to apply for a pre-approved mortgage. This is usually a driver’s license or passport. You also have to give your Social Security number to have your credit checked. Your lender will ask you to sign a document authorizing them to pull your credit. After you have provided all of this information, it is up to the lender to pre-approve you or not. The pre-approval process can take anywhere from a few days to a few weeks. You can try to be pre-approved from other lenders within 45 days without the multiple inquiries affecting your credit. So, feel free to see what you can qualify for with other lenders.

After you have been pre-approved, you then should go look at homes that are within your price range. Once you have found a home that you want to make an offer on, let your lender know. At that point, you can move into the full application process. Your file will be sent to underwriting where underwriters will make the official decision about whether the loan will be approved or denied. If you have been pre-approved, you will usually be approved for the loan in the end. That is not to say there will not be some bumps along the way. It is very common for underwriters to request more information from you during this process. If you had a late payment on a credit card last year, they may want a written explanation for it. Or, perhaps you are self-employed and changed the focus of your business last year. The underwriter may want you to explain why the change was made and what your prospects are for the future in your business.

Takeaway on Getting Pre-Approved for Your First Mortgage

Securing approval for your first mortgage is a pivotal step in realizing homeownership. To enhance your chances, start by assessing your credit report and addressing any discrepancies or outstanding issues.

A higher credit score generally leads to more favorable mortgage terms. Saving for a substantial down payment is crucial; it not only demonstrates financial responsibility but can also result in more favorable interest rates. Additionally, evaluate your debt-to-income ratio, as lenders often favor applicants with lower ratios. Research various mortgage options and lenders to find the most suitable terms and interest rates.

Prioritize getting pre-approved, a process where lenders assess your financial health and provide an estimate of the loan amount you qualify for. While considering loan options, opt for one that aligns with your financial capacity and future goals.

Lastly, maintain financial stability throughout the mortgage application process, refraining from large purchases or significant changes in income that may affect your eligibility. Seeking guidance from a mortgage professional can further streamline the process and increase your chances of securing approval for your first mortgage.

The bottom line is the pre-approval process is important for the first-time home buyer to eventually be approved for a mortgage. So, be sure that you do not neglect this vital part of the home buyer process.