Darin and Christina Cunningham | Re/Max Elite
278 Franklin Road Suite 190 | Brentwood, TN 37027
Office: 615.661.4400 | Fax: 615.661.4115
Christina: 615.394.4168 | Darin: 615.456.4086

What to Consider when Getting Pre-approved for a Mortgage

Before you start home shopping, you’ll need to spend time mortgage shopping. While you may have a general idea of how much you want to spend on a home, you won’t know how much a lender will give you until you go through the pre-approval process. It’s a relatively simple process and often either free or very low in cost (you may have to pay a small application fee).

However, you should absolutely get pre-approved for a mortgage because:

  • You need to know exactly how much you can get a mortgage for, so you know your home-buying budget and look for houses in that price range
  • Sellers most likely won’t negotiate with you unless you’ve been pre-approved

Mortgage broker or lender?

First, you’ll either need to approach a lender directly or a mortgage broker to get pre-approved. A broker is a middleman who doesn’t give out loans directly and will ultimately take a fee when you actually get your loan. However, a broker may help you find the best rate and best terms to worth with. Conversely, you can go right to the bank and work with their loan officers, but that narrows your options a bit. Once you start working with a broker or officer, you can find out more about which loan works best for you.

If you get turned down by the first lender, don’t be discouraged. Keep looking around. Each lender will run your credit score, but it won’t affect your credit rating as long as each lender does it within a 45-day period.

Documentation you’ll need

Before you start the preapproval process, collect your recent financial documentation, including:

  • Last two years federal and state tax returns
  • Last four pay stubs
  • Recent bank statements (usually about six months)
  • Two years of W-2 statements (or 1099s if self-employed)
  • Evidence you have the money for a down payment (checking, savings, and investment account statements)

If you’re financing the down payment yourself, you’ll just need financial documentation that says you have it handy. If a friend or family member is providing the down payment, you may need a letter stating that they are giving you the money. Then, they might need to show proof that they have the funds available.

What will affect your mortgage preapproval

During the mortgage pre-approval process, you’ll learn not only if you qualify for a mortgage but how much you can get approved for and what the interest rate could be.

There are several factors that impact the final pre-approval:

  • Your credit score. A higher score makes it more likely to be pre-approved, plus you’ll get a lower interest rate. It might be worth it to work on improving your credit rating before going through the approval process.
  • Your income. The more you make, the higher the monthly mortgage payments you’ll be able to make. If you have a spouse or partner’s income to include as well, that will up your bottom line.
  • Employment history. Lenders are more willing to give loans to people with a steady, stable employment history.
  • Down payment. When seeing if you qualify for pre-approval, the lender examines how much you’re able to put down. If you have the money for 10% rather than 3.5%, you might have more options during the pre-approval process.
  • Type of loan. Different loans come with different terms and requirements. You may qualify for a construction loan, an FHA loan, VA loan, or another type. You can opt for an adjustable or fixed rate. Whichever one you chose will ultimately affect the funds you’ll receive.

Darin and Christina Cunningham of RE/MAX Elite in Brentwood, TN are here to help you through the entire home buying process. We help buyers obtain their dream houses in the greater Nashville area. Let us get you into your next house by calling 615.661.4400 or using our contact form today.

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