The market for new homes is heating up across the nation as demand continues to rise in many cities that are undergoing revitalization and courting new industries. This economic activity is a sure indicator your local home market is going to get more active, and one of the best ways to handle the competition is by going out there with a preapproval letter that lets you make an offer with confidence. Preapprovals basically set up an application minus the actual address so mortgage brokers and their associates can determine what the largest purchase supported by your finances will be. The typical preapproval is good up to a certain amount with a predetermined down payment. There are also often some property condition requirements for the loan to close. When you have this set up, sellers know you are ready to close promptly, so they are more likely to respond quickly and positively to your offer.
Preparing to Apply
Before you even talk to a mortgage company, there are a few steps you should take to make sure your application goes through preapproval easily.
- Check out your credit score and look at the detailed report to see if there are any unpaid debts bringing it down
- Make sure all your loan accounts are current
- Try to bring your credit lines below a quarter of their maximum balance
If you take all these steps, you should be able to get your credit into the range where you can qualify for a loan. If you can’t do all of these, the most important steps are the first two. A high credit balance can cost you some points, but if everything else is okay, a slightly high balance won’t keep most borrowers from qualifying. Once you have your credit situation double-checked, you should also make sure you have enough in savings to cover the down payment. This is where talking to a mortgage company like Sun West Mortgage helps. The down payment you will need depends on the size of the loan and the loan type, so you will need a mortgage company to confirm the number you are shooting for unless you have done research into the various loan types already.
Applying For Preapproval
Most first-round applications are relatively straightforward. Your mortgage company will want to see all of the following, in addition to the forms they ask for.
- Pay stubs or other sources of income
- Proof of assets
- Social Security card and other identifying information
They will certainly run a credit check as part of the process. Realistically, if you have down payment funds, income that supports the loan, and a clear credit report, you should get that preapproval letter. If not, you will find out what to do to get your application in shape so you can enter the market with confidence when you are ready.