Authored by Kate Beswick in Mortgages
Published on 09-17-2009
Getting preapproved for a mortgage loan can make a big difference when you’re trying to buy a home. A preapproved mortgage loan states that a bank or other lender guarantees you a certain amount of money they are willing to loan you in order to buy your home. Getting preapproved for a mortgage loan is helpful because it can give you an edge when putting in an offer to buy a home. Sellers will feel more confident selling you their home when they can plainly see that you will have the money to pay for it. If you’re in the market for a new home, here are some things you will need to take into consideration if you want to get a preapproved mortgage.
Your credit report is the first thing any lender will look at when you are applying for a preapproved mortgage. This credit report tells lenders how capable and likely you are to repay the loan. Credit reports are based on FICO scores. If your FICO score is above 750, you will most likely have no trouble getting a preapproved mortgage. Anything below 650 may still get you a preapproved mortgage but you should be prepared to pay high interest rates.
Your work history is the next item that will be considered when you are trying to be preapproved for a mortgage loan. Those that can show a steady work history will be more favored for a preapproved mortgage loan. This is because it shows the lender that you will have the means to repay the loan. A stable work history is considered to be one where the applicant has had steady work for at least two years. This is even more favorable if the applicant has been with the same company during that time.
Payment history is another big consideration when trying to get preapproved for a mortgage loan. Any time you are late on a payment it shows up on your credit report. Being late on payments is one of the biggest reasons why you might not be preapproved for a mortgage loan. If that’s the case, making payments on time for 6 or 12 months can usually help improve your payment history enough to qualify for a preapproved mortgage.
Loans, including credit card loans and student loans, can hinder the preapproval process when you’re trying to get a mortgage. If you have many outstanding loans, or the total monthly payments are very high, you may be required by the bank to pay these off in full before getting a preapproved mortgage loan.
Having assets such as a car or another home will look very good in the eyes of the bank if you are trying to get preapproved for a mortgage loan. Not only does it raise your net worth but it also shows the bank that you can make payments on time. And, if the loans on these assets are already paid off, you might be guaranteed a preapproved mortgage!
Getting preapproved for a mortgage loan is not difficult. As long as you have a fairly unblemished credit report and don’t have a lot of outstanding loans, just about anyone can get preapproved for a mortgage loan. The applications for preapproved mortgages don’t take long and you can even do it online! It’s the fastest and easiest way to get a mortgage when you’re trying to buy a home!