What you need to know about Mortgage Preapprovals
June 19, 2024
Get Pre-Approved & Unlock Your Dream Home (The Easy Way)
Hello future homeowner! We know buying a home can be a big step. In the current Seller’s market, a preapproval is a must. There is a lot of competition as a Buyer and Sellers must quickly weed out anybody that does not look like a serious contender.
A Pre-approval gives you a realistic estimate of how much you can borrow, empowering you to make good decisions on what home is a good fit for the life you are creating.
What is Mortgage Preapproval?
Mortgage pre-approval is a preliminary assessment from a lender that estimates the amount of money they would potentially lend you. This estimate is based on your current financial situation, including income, debt, and credit history.
Your Credit Score Matters
Your credit score plays a significant role in your pre-approval amount and the interest rate you’ll be offered. Maintaining a good credit score through on-time payments and responsible credit card use is crucial. You can learn more about your credit score here:
https://www.experian.com/blogs/ask-experian/credit-education/score-basics/what-affects-your-credit-scores/
Debt-to-Income Ratio (DTI): Your Financial Balance
Lenders calculate your DTI by comparing your monthly debt payments to your gross monthly income. A lower DTI indicates a better financial position and may result in a higher loan approval. You can learn more about DTI here:
https://www.consumerfinance.gov/ask-cfpb/what-is-a-debt-to-income-ratio-en-1791/
Tips for a Smooth Pre-Approval Process:
- Avoid making large purchases: New loans or credit cards can negatively impact your DTI and credit score.
- Maintain steady employment: Lenders prefer borrowers with a consistent work history.
Budgeting for Your New Home
Creating a budget is essential. Factor in your anticipated mortgage payment, property taxes, insurance, and other monthly expenses to ensure you can comfortably afford your new home. This should include monthly contributions to address future major home expenses (e.g. roof, furnace, windows, exterior maintenance)
We’re Here to Guide You
The process of buying a new home can be overwhelming. We’re here to help you make informed decisions, enable the next chapter of your life, and have some fun along the way!
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