As fun as it is to buy a new home, it's hard to find the right house when you don't know what you can afford!
That's where getting preapproved for a home loan comes into play. Therefore, perform proper research, compare home loan rates and then apply for preapproval to ensure things are running smoothly. The preapproval process consists of lenders looking at your income, assets, and credit score. From there, you'll have a better idea of what you could borrow and what your interest rate would be.
Say you'd like to buy a manufactured home. It'll be a much easier process to make an offer if you're already preapproved for a loan. You won't have any doubts it's the right home for you because you'll already have a loan lined up!
Do you want to know the fastest way to get preapproved for a home loan? I'll provide you with a brief overview of how to get preapproved in this article!
1. Check Your Credit Score
Do you know what your credit score is? An excellent place to start is running a free credit score, so you know where your credit stands.
Lenders look for credit scores of at least 620. Anything higher than that means you'll likely qualify for better rates. If your credit score is above 740, you have stellar credit! Having a high credit score is excellent news because you'll be eligible for the best possible mortgage rates.
If you have bad credit due to debt or other factors, then you may want to hold off on buying a home. Unfortunately, a lender probably won't approve you until your credit has improved.
2. Look for Errors on Your Credit History
It’s important for your credit score to be accurate, so read through it to ensure it is free of any errors.
A few examples of different errors that may show up on a credit report are:
- An incorrect address or an address you've never lived at.
- Inaccurate credit limits.
- Information that should have been removed; marks against your credit should be removed every seven years.
- Incorrect account numbers or an account that doesn't belong to you.
You can see why checking over your credit report is essential. If you see an error, it's vital to get it corrected ASAP, especially if it could be a deciding factor for getting a loan!
3. Be Able to Verify Your Employment
Another part of the preapproval for a loan process is the loaner verifying that you're employed. You will need to provide pay stubs, and the lender may also likely call your employer. If you recently changed jobs, the lender will contact your past employer as well.
If you're self-employed, be aware that you'll need to provide extra paperwork. It will take additional time to gather the paperwork and your income, so get a headstart now.
Getting preapproved will largely depend on the strength of your business. Keep a record of what you get paid and how long you've been in your line of business. This will prove that you have a steady stream of income coming in each month.
Bonus: Gather a List of Assets and Liabilities
Another factor of getting preapproved for a loan is your existing assets and liabilities. So, you should put together a list of all your statements with current balance amounts.
Here are some of the accounts you could list:
- Checking and savings accounts
- Stocks
- Bonds
- Retirement savings
- Life Insurance
- Mutual funds accounts
Including statements will prove that you have the available funds to make a down payment on a house.
So start gathering this information and look over your assets. Having everything ready for the lenders will help them preapprove you quicker.
Conclusion
Getting preapproved for a home loan before hunting for a home is ideal. It'll ensure things run smoothly right from the get-go. After you’re preapproved, read this article from Strive Communities about the rest of the home buying process.
Imagine how discouraging it would be if you decided on a home only to discover that you can't afford it. That's why it's wise to get preapproved for a loan ahead of time.
Research your credit score and gather all your paperwork before looking for a home. Having a preapproved home loan will provide the guidance you need to find a home that's perfect for you!
