Hi Anne-Marie, Your HomeActions News for Tuesday, April 07, 2020
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Anne-Marie Tustin
Anne Marie Tustin
Broker Associate
Direct: (609) 575-8801
Office: 609.737.1500
atustin@weidel.com
Weidel Real Estate
Pennington NJ 08534
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How To Get Preapproved for a Mortgage

 

Mortgage prequalification is an initial assessment of your financial status to estimate how much of a mortgage loan you may be able to afford. How can you be confident that you're ready to get a mortgage preapproval? Let's count the ways:

Get your free credit score — Know where you stand before reaching out to a lender. It's best if your credit score is 620 or higher — higher credit scores qualify you for better rates. A credit score of 740 or more gets the best mortgage rates.

Check your credit history — Estimate your debt-to-income ratio, which is the percentage of gross monthly income that can go to debt payments, including credit cards, student loans and car payments. Some websites include debt-to-income ratio calculators. Lenders prefer a DTI of 36% or below. Know that in some cases, it can be higher.

Gather income, financial accounts and personal information — Include Social Security numbers, current addresses and employment details for you and a co-borrower, if there is one. Expect to show bank and investment account information and proof of income.
You'll likely have to submit your W-2 tax form, 1099s and pay stubs. Two years of continuous employment is preferred, though there can be exceptions.

Self-employed applicants likely will have to provide two years of income tax returns. You're showing the stability of your income, the nature of your business and its location, and the demand for your product or service, as well as your business's financial strength and its ability to continue generating income that allows you to make payments on a mortgage.

If your down payment comes from a gift or the sale of an asset, you'll need a paper trail to prove it.

Contact more than one lender — To find the right financial partner for your situation and to save money — you could save $430 in interest in the first year or $9,200 over a 30-year mortgage — shopping lenders is a good idea. Checking out rates shouldn't hurt your credit score. FICO, one of the largest U.S. credit scorers, recommends confining these applications to a limited time frame — 30 days, for instance.

A mortgage preapproval lets you discuss loan options and budgeting with a lender. You unearth any credit problems in advance. And you'll learn the maximum amount you can borrow to help you set a price range. 

The mortgage preapproval isn't a guarantee. Real estate agents and home sellers will feel you're a legitimate buyer, but the lender's offer may not stand if your financial situation changes. And know, too, that other steps such as a home appraisal need to be completed before your loan can close.

With your preapproval letter, you'll find that buyers are more willing to negotiate — you're proving that you can obtain financing. Consulting with a lender before the home-buying process can save a lot of heartache later — and help set you on a smooth path to a secure financial future.

 
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Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose. If your home is currently listed with another broker please disregard this email. It is not our intention to solicit the listings of other brokers.
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