With the near collapse of the credit industry and the banking and housing meltdown, getting a pre-approved mortgage is tougher than ever. If you are lucky enough to have been pre-qualified, consider yourself lucky and take advantage of the situation. Keep in mind that there are differences between the terms pre approved and pre-qualified and they can make a big difference in the way you go about purchasing your home. Here are a few things to help you understand the difference.
Being pre-qualified for a mortgage simply means that a potential buyer has gone through the steps necessary to meet the criteria established by the Federal Housing Authority. It doesn't really have anything to do with being approved by a lender. To be pre-approved, the buyer must get the pre-qualified status verified by a mortgage company and have their credit verified. Nice these steps are completed, then the buyer is said to be pre-approved. So as you can see, getting pre-qualified is actually a necessary step in getting pre approved.
There are certain requirements for pre-qualifying for a mortgage.
Employment history is very important and you generally must demonstrate continuous employment with the same employer for at least two years.
The next important factor is income. You need to show that your income has been steady or even better improving for the last two years. This will help determine the amount of loan you are qualified for.
Your credit report will need to show that you regularly make required payments on your loans and bills. The last two years are the most important and your record needs to be near spotless. If your recent credit history isn't perfect, you should probably forget pre-approval.
If you have a bankruptcy on your record, you can minimize the damage by showing a great deal of recent improvement in your financial situation.
If you have a foreclosure, you will need to wait at least three years in order to get pre-approval. The three years begin at the completion of the foreclosure process.
Average monthly income needs to be at least 30% of the monthly mortgage payment.
Once you meet these criteria, you should be able to get pre-qualified. The next step is to get pre-approved.
Once you meet the above criteria, you will need to fill out the pre-approval application and attach all evidence of meeting the pre qualification requirements. The lender will review the documents and make a decision as to whether you are pre-approved and for how much. A personal interview might be required to clear up anything that is less than perfect in the paperwork. If all is in order, you will be pre-approved and can start shopping for a home with a little more buying power.
Many sellers are willing to offer good deals to buyers who arrive with a pre-approved mortgage. They don't need to worry about going through the selling process only to have the deal fall through due to the buyer not being approved. If at all possible, it is recommended to begin your house hunting with a mortgage pre-approved. This also helps you by giving you the exact amount that you can afford on your home purchase.
Bret Dashel is a senior copywriter for Ratelines.com. For nearly 6 years, Ratelines has been an objective and reliable source of financial information. For factual advice on top cd rates, please visit our site.
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