Mortgage pre-approval gives home buyers a better idea on what kind of loans they will have access too. By definition, a pre-approval is a statement from a lender that reports how much money a buyer will be able to borrow under the lender’s guidelines. This makes the process of buying a home smoother, as it allows home buyers to better understand how much house they can afford, and what kind of home mortgage rates they will have to pay. But what does it take to get pre-approved? Here are the three things home mortgage lenders look at when pre-approving a buyer for low rate mortgages.
Strong Credit
An individual’s credit score is a record used by lenders to determine how likely you are to pay back your loan. According to the Home Loan Learning Center, a majority of lenders require a minimum credit score of 680, or 620 for FHA home loans. Before you even begin to compare home loans, check your credit score to ensure that it meets the base requirements. If your score is low, clean up your credit history and fixing errors can help bring your credit up.
Steady Income
Lenders want to know that you are going to be able to make enough money to meet the mortgage payments once the house has been bought. This is why sticking with your employer while working with home mortgage lenders is important. Any changes to your employment or income status can give lenders a reason to halt the lending process. Even if you don’t like your job, it’s recommended that you hold off on quitting until you’ve closed the deal.
History of Employment
Another way lenders ensure that a home buyer will be able to pay their mortgage payments on time is by looking at their employment history. If the home buyer is prone to moving around jobs, or has had long periods where they were unemployed, lenders will likely decline their pre-approval. Lenders want to see a buyer who is responsible, and will be able to keep a job long enough to pay their loans.