What is pre-approval?
A pre-approval is generally a written statement from a lender that states the lender’s preliminary determination that a borrower may qualify for a loan amount under that lender’s guidelines. Pre-approvals provide you the ability to see how much you can afford to determine your budget, which will help to insure that you do not waste your time looking at homes that are out of your price range. The determination and loan amount are based on income and credit information. It is a good idea to go ahead and get your pre-approval out of the way if you are already looking for property. In some cases you will need to act very quickly and knowing that you have already been pre-approved for a particular amount could make buying your dream home a quicker, less stressful process, especially if there is a bidding war. Pre-approval letters are typically only good for up to 90 days, so you may need to get another one if you spend a long period of time looking.
How to get pre-approved?
Be prepared to share your complete financial history with your lender. They will typically start the pre-approval process by asking for some basic information about your financial history. Generally, a lender will then request your Social Security number to pull your credit report. If the information you provide and the information obtained from your credit report satisfies the lender’s guidelines, the lender will then make a preliminary determination in writing that you would qualify for a specific loan amount subject to their conditions. Please note that each lender has its their own standards and processes for determining whether to grant a pre-approval, so it will not always be the same.
Trouble getting approved?
While getting a pre-approval is helpful, not all home buyers will get pre-approved. However, there are a few things you can do to help get your finances in order to better prepare you for home ownership.
- Improve your credit score. This step can be a lengthy process, but is an incredibly important action that will pay off in the long run. Occasionally errors also happen on your credit report, and fixing them will help to insure your financial history has the most accurate numbers as possible.
- Keep your debt-to-income ratio to 36 percent or less. Too much debt looks bad to lenders, keeping it to a reasonable amount will help you in the lending approval process.
- Put more towards your down payment fund. The more you have saved, the less you will have to rely on the bank for.
Click here to get started on the pre-approval process by connecting with one of our preferred lenders. These certified loan originators specialize in financing homes in the Destin and Santa Rosa Beach area real estate market, and are prepared to find you the best program with competitive rates and low down payments.