How To Get Pre-approved For A Home Loan
To get pre-approved for a home loan, you have to determine:
- How much you can borrow
- How much you are qualified to borrow
- The interest rate you can use
All of these factors will be determined by your lender. Here are some items the lender will request for when being pre-qualified:
Income proof
As a borrower, you need to present W-2 statements from the last 2 years. This is a form that employers send to the IRS and their employees at the end of a business year. This reports an employee’s annual income along with taxes withheld from their paycheck.
This also includes payment stubs that prove your income along with additional income such as bonuses, tax returns etc.
Proof of Assets
To prove you have enough money to cover the closing costs and down payment, you need to provide proof of assets. This includes bank statements, cash reserves and investment account statements. If you go for a FHA loan, you need to set down at least 3.5% of the home’s cost and 20% for a traditional loan program. Plus, if someone lends you money for this, the lender will ask for a gift letter as proof.
Credit history
A stable credit history is a borrower’s best friend. Lenders are more willing to lend money to mortgage hopefuls who make payments on time. So obtaining your credit history or FICO score will be beneficial before visiting a lending agency. The higher your FICO score is, the more money the lender is willing to borrow. Now if you faced tough financial issues in the past learn how to correct hire a financial counselor to repair your credit report accordingly.
In order to be pre-approved for a home loan, obtaining the right lender can tip your case in your favor. Shop around for one by asking your close friends and family members for recommendations. Compare rates and loan programs and choose one that suits your needs.
Plus, consider getting a pre-approval as well. The results will tell you how much you can afford and whether you are ready to own a home yet. It will also let lenders know that you are a credible buyer.