You can save some time by getting a preapproved mortgage before you start searching for a home to buy. Your lender will let you know the maximum amount he can finance, which will help you narrow down the price range of the home. The amount of money you have saved for a down payment can help you to buy a more expensive home, as long as your monthly payment remains within the lender’s maximum. If you apply with more than one lender, you may get pre-approvals from both of them, which will allow you to choose the better loan structure for your financial situation.
Tip #1: Organize your Personal Information
Contact the mortgage lender you have chosen and ask him to give you an application. He may also have a checklist of items he will need in order to be able to review your loan request. Find out what information you need and include all of the documents with your loan application.
As you complete the application, fill in the specifics about your creditors. Include all of the monthly payments and current balances for each creditor. If you intend to pay off some of your creditors, include them on the application but make a note in the margin that indicates you will be paying a particular creditor in full.
Tip #2: Decide in Advance the Type of Mortgage Loan You Want
If you have an idea of the type of mortgage you want, it should be easier to get a pre-approval on your loan. Decide if you want a fixed-rate mortgage or an adjustable-rate mortgage (ARM). If you are able to reduce the term of your loan, you can save on the finance charges. Compute the monthly payments for each type of mortgage and make sure the amount falls within your monthly budget.
The amount of money you have saved may make a difference in both the term of the loan and the type of loan you choose. Your lender may give you a better interest rate on your pre-approval if you have more than 20 percent down, since no private mortgage insurance will be needed.
Tip #3: Improve Your Credit Score
You can get a copy of your credit score for free using the Internet. Once you have your report, go over it and see if all of your information is correct. Identify any miscalculations by creditors concerning your balances and contact them to have the errors corrected.
You can improve your chances of receiving a pre-approval on your mortgage by paying down your existing credit card debt, since your credit score will rise. If you also are able to pay off some of your installment debt, this will help improve your credit score.
Any bad credit should be cleared up, or your lender may not be able to give you a pre-approval for the amount you want. Try to make arrangements to bring your bad credit current before you apply for the preapproved mortgage.