To be prequalified for a mortgage, your lender will ask you a few questions about your income, assets, and down payment. Your lender may also ask you about your credit card debt to get a clear understanding of your financial situation.
The pre-qualification process varies by lender, and you may be able to get prequalified for a mortgage over the phone. Your lender will likely run a credit check before presenting you with the estimated amount you’ll be able to borrow.
It’s important to understand that pre-qualification is an informal process. Being prequalified for a certain loan amount does not mean you are approved to borrow the amount.
Pre-qualification is an excellent tool you can leverage when you start looking for homes in Houston.
If you’re a first-time homebuyer, you can go through the pre-qualification process to determine approximately how much you’ll be able to borrow.
Pre-qualification is optional and informal. Preapproval is formal and highly recommended for first-time buyers shopping in a competitive market.
What You Will Need To Get Prequalified For A Mortgage
When you begin the preapproval process, there are a few things your lender will want to verify. Be prepared to provide proof of the following items.
- Financial stability
- Income and employment
Your lender will ask to see your W-2 statements, recent pay stubs, a breakdown of your monthly expenses, and information about any real estate you own.
Getting preapproved for a loan allows you to move forward more easily with the purchasing process.
Getting preapproved doesn’t mean you’re officially approved for a loan, but you’ll get a preapproval document from your lender that you can show to sellers and agents.
Getting a letter of preapproval positions you as a serious, qualified home-buyer and makes it easier to shop.
While pre-qualification and preapproval can help you determine your budget, securing a letter of preapproval will put you on the fast track to becoming a homeowner.
Want to Get Preapproved? Follow These Steps
1. Know Your Credit Score
In order to get preapproved, you’ll need a FICO score of at least 620. A score of 740 or higher will allow you to get the lowest interest rates.
Be sure to get a copy of your credit report, clear up any errors, and completely resolve any issues before applying for preapproval.
2. Lower Your Debt-to-Income Ratio
If you have a lot of debt and little income, your chances of being preapproved are slim.
Calculate your current ratio and get it below 36% before trying to get preapproved.
3. Gather Financial Documents
Your lender is going to ask to see quite a few documents. It’s best to have these documents on hand and ready to go. Being prepared shows lenders you are responsible and serious.
To get preapproved, you’ll need these documents.
- Social Security number
- Proof of address
- Employment information
- Proof of additional income
- Proof of assets
- Bank account information
- Pay stubs
- Other documents may be requested depending on your lender.