DON’T BE DISCOURAGED, BE PRE-APPROVAL READY
When future buyers embark on the journey to find their homes, they overlook one of the biggest steps of the home buying process, getting pre-approved. Lender’s are required to verify that the interested buyers meet the minimum pre-approval requirements (supporting documents required) for these three categories: Income, debt-to-income, and credit score. Income It’s strongly preferred for a buyer to have a minimum of two years of continuous employment. Income can be verified by the previous two years of tax returns, the last thirty days of pay stubs, the last two months of the buyer’s bank statements, income award letters, and assets. Keep in mind, if your down payment will be coming from a gift or sale of an asset, additional paperwork will be required. Debt-To-Income A buyer’s debt-to-income (DTI) is the percentage of gross monthly income that goes towards monthly debt payments. This includes credit cards, student loans, car loans, etc. DTI based upon current debt including the prospective mortgage should be 36% or below, although it can be higher in some cases. There are various loan products that may have different DTI requirements, therefore buyers should not rule out the possibility of being pre-approved until they’ve spoken to multiple lenders. Credit Score Naturally, a lender requires a credit application to determine the buyer’s credit score and debt from the credit report. A credit score of at least 640 is recommended, this may vary from lender to lender and specific loan products. The higher a buyer’s credit score the better the mortgage interest rates they’ll obtain. Once the credit application is pulled, the lender will advise the buyer about the specific type of debt that should be paid off, if any. We advise buyers to withhold from making significant purchases and to start monitoring their credit score a year prior to shopping for a mortgage pre-approval. Don’t be discouraged, get informed, and do the work. Optimize your home buying power and achieve the pre-approval you deserve. Krystal Menser, Associate Real Estate Broker
