Getting a mortgage pre-approval is an important first step to buying a house. Before you even start to shop for homes, it is important to know how much you can afford and if you will be approved for a mortgage.

What is the different between being Pre-Qualified and Pre-Approved?

Loan pre-qualification basically just means that you have a short phone conversation with a lender to get an estimate fo what you might be able to afford. This can be done without providing any paperwork. Most realtors® will require that you at least get pre-qualified before looking for homes.

Loan pre-approval means that the lender has decided you are a good candidate for a loan. They will let you know how much the loan will be approved for. When you submit an offer on a home, a pre-approval letter from the lender will hold much more weight in helping you to get the home than a pre-qualification letter will. So if you are ready to start searching for homes, go ahead and start working to get pre-approved.

How To Get Pre-Approved

Addresses Be prepared to give the addresses where you have lived and include your landlords contact information if applicable for the past 2 years.
Proof Of Income You will be asked to provide your last 2 years of W-2 statements and tax returns. The lender will also want copies of your most recent pay stubs and proof of any additional income.
Debt-To-Income Ratio (DTI) Your DTI should be below 40%, including your mortgage and insurance payments. Calculate this? Add up your monthly income, then subtract all of your monthly debts. Your debts should be less than 40% of your income.
Employment Verification The lender will check your employment status. They typically want you to have at least 2 years at the same job or in the same line of work.
Proof of Assets The lender will want to make sure you will be able to provide a good down payment. Be prepared to show your recent bank statements, investments etc. Conventional loans require a down payment of 10-20%. FHA or VA loans don’t require as much down..
Good Credit The lender will ask for your social security number and permission to pull your credit. Lenders like to see a score of about 620 or higher. The better your score, greater your likelihood is of getting a great rate.