How do I get Pre-approved for a Mortgage?

Getting pre-approved for a mortgage will give you the edge when making an offer on your dream home. If the seller and agent see that you have your finances in order, the whole process will go much more smoothly.

Here's how to get pre-approved:

Find a lender or home mortgage broker through a referral from friends, relatives, co-workers, or a real estate broker.
Be prepared to disclose information such as gross monthly income and total monthly payments, including car payments, credit card minimums, child support, and anything else you pay each month. You will also have to submit the last two years of federal tax returns, last three months of bank statements on every account you own, and a loan application.
Calculate your total debt-to-income ratio – you can ask your lender to help you do this if needed. The percentage has to be under 36 to receive an ideal interest rate. The lower the number, the better off you'll be in the eyes of the lender.
Authorize the lender to cull information from your credit report. Make sure your credit report includes your FICO score, as this is what lenders use most often to determine your financial dependability. Your credit score takes many factors into account – how long you've been employed at your current job, occupation type, how long you have resided at your current address, balance and credit line ratios, homeowner status, recent inquiries into your credit, age, how many credit lines you have access to, number of years with a credit card, bankruptcy, collections against you, foreclosures, and slow pays. 680 or higher is an excellent score, and is seen as an A+. A score in this range should land you a very good interest rate.

Ask your lender to write a letter of pre-approval so that you can present it to home sellers as proof of your pre-approved status. It should mention that important financial records have been taken into consideration and everything appears sound.

When you have the lender write a letter of pre-approval, make sure it only states the amount you need for the specific home you want to purchase. You don't want the seller to think you can afford to pay more.

The process may be more difficult or time-consuming if you are self-employed or have been working for less than two years. In this case, the lender may require more

In the end, shop around for the best rate if your lender doesn't come up with the best offer.

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