How to Get a Pre-Approved Mortgage

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If you want to get pre-approved for a mortgage, remember that agents consider proactive buyers valuable. Study the ways to make sure you are qualified and ready -- it's a big step.

Step 1: Manage your money
Manage your money, paying monthly bills on time, in preparation for a pre-approved loan. Plan for a total home loan payment, including fees, taxes, and insurance, that should be between 28 and 35 percent of your gross income.

Step 2: Consult with lenders
Consult with two or three lenders before looking for a new home. Establish your price range and shop for the best rates. Be wary of pushy mortgage officers. Instead, opt for a lender who can be honest about whether your credit, income, or budget come up short.

Tip
The pre-approval process doesn't obligate you to a lender.

Step 3: Verify income
Verify income, credit, and assets to ensure you can make the monthly payments on a house. Provide W2 statements for the last two years, federal tax returns, bank statements, pay stubs, and anything else the potential lender might need.

Step 4: Consider credit score
Consider that a loan inquiry can affect your credit score, especially if you've applied for credit cards recently. The score will ignore mortgage, auto, and student loan inquiries made the month before your scoring, however.

Step 5: Make a good down payment
Save enough to put down at least 10 to 20 percent of the price of the home as a down payment.

Step 6: Network for good lenders
Expect that the seller will want to know you are working with a financially sound institution. Network with a local real estate agent to get good recommendations.

Tip
Pre-approval letters are typically only valid for 90 days, after which they expire and the process must begin again.

Step 7: Notify them of changes
Notify the institution whenever your financial situation changes -- credit, job status, income, or assets -- in case your pre-approval needs to be adjusted. In the process of being pre-approved, don't leave anything to chance. You want to make sure that everything is in place when you find your dream home!

Did You Know?
According to the U.S. Department of the Treasury and the Department of Housing and Urban Development, as of 2010, more than 116,000 homeowners had permanent mortgage modifications, almost double the year before.