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Mortgage pre-approval is a great tool for a borrower to use when house hunting. As a buyer, you want to be taken seriously and that means being ready to make a down payment on the home loan and an offer to the seller that you can live with financially.

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What to Ask Before Applying for Mortgage Pre-Approval

August 15, 2021

What to Ask Before Applying for Mortgage Pre-Approval
Mortgage pre-approval is a great tool for a borrower to use when house hunting. As a buyer, you want to be taken seriously and that means being ready to make a down payment on the home loan and an offer to the seller that you can live with financially. 

The pre-approval process requires some advance information--estimates of things like property taxes, mortgage amount, etc. but before you can start thinking about those issues

When planning your mortgage, before applying for pre-qualification, ask yourself if you know the specific price range you need to buy the house and still be able to realistically afford it based on an estimate you get from using a mortgage loan calculator.

Another thing to ask yourself before applying to get mortgage pre-approval? What's your credit score? If you haven't seen your credit reports before applying, you are NOT READY for a mortgage application or even a pre-approval form. 

Why? 

Because you don't know whether you have to take a lot of extra time to correct a credit report or not, and you may need to dispute errors, inaccuracies, etc.

Generally speaking, if you have an open dispute on a credit report, it might be a bad idea to approach a lender until those issues are resolved. A mortgage lender can't take your word for it that your credit issues are being worked on, they need to see that your report reflects the correct information.

Credit issues are important for home loan transactions because they can affect the interest rate you are offered, and even if your credit check comes back with no errors or evidence of identity theft, if the lender sees your scores are lower than expected or that you have a repayment history that is not as reliable as it should be, you may have trouble getting approved for a loan.

The big three areas to pay attention to in the time leading up to home loan approval are credit scores, credit usage (you want to carry lower balances on your credit cards--try to get them well below 50% of the credit limit) and repayment history.

One reason your lender wants to review your credit report, bank statements, pay stubs, and other information is so that an accurate picture of you as a borrower can emerge. 

Your loan underwriter needs to justify approving the home loan. The purchase price may be great, and your tax returns may show that you are a steady worker with a reliable income.

But if your financial picture also includes a spotty repayment history in the 12 months or more leading up to the loan? Your lender gets into trouble trying to justify approving the mortgage.

There are other concerns you should be more informed about when getting ready to apply for pre-approval. Do you know how much of your monthly income is taken up by outgoing debt payments? You will want to know those numbers in advance, too.

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