Getting a mortgage pre-approval is an important first step in the home-buying process. With a pre-approval in hand, you know how much you can spend on a home, and it locks in the current low interest rate for up to 120 days, so you can shop the market knowing you’re insulated from rate hikes in the near future. If the rate drops before you’re ready to buy, your lender should honour the new lower mortgage rate when you’re ready to make your purchase.
It's important to know the key things a lender will want to know before giving you a mortgage pre-approval. Your lender is going to want to know about your financial standing, how much you can afford, and which loans might best suit your circumstances. Applying for a mortgage requires an application and supporting documentation, and it can be a little intimidating. Here are three things lenders will want to know before giving you a mortgage pre-approval.
3 Requirements for a Mortgage Pre-Approval
The lender will check your credit score. Knowing your credit score will give lenders an inside look at your credit habits and history, and will help them decide if you’re a good candidate for a loan. Your rating will be between 300-900; higher scores are good news, and will typically secure a better mortgage rate, since you post a lower risk of defaulting on your mortgage payments.
The lender will check your employment history. Lenders will ask for a list of your past employers, and how long you’ve been with your current employer, before writing a mortgage loan. They want to make sure you consistently earn money with no major gaps in income, and that you can make regular mortgage payments over the long-term.
The lender will check your assets and debts. When you apply for a mortgage, be prepared to show your most recent income tax records, recent bank statements, and current debt amounts, including credit card balances, car loans, student loans or lines of credit. Lenders also want to know your debt-to-income ratio to determine if you can make each payment based on the income you earn and other financial obligations. The lender will require proof of your down payment.
Many lenders offer a mortgage pre-approval online, so the process is simple. Find a mortgage lender that you’re comfortable with. If needed, your CondoGo agent can provide a referral. Have more questions about the home-buying process, or ready to move forward with your purchase? Get in touch with CondoGo agent today and we'll be more than happy guide you through the process at no cost or any obligation.