The Pre-approval Process in Charlotte, NC
Before you start the homebuying process in Charlotte, NC (or anywhere, really), you’ll need to get pre-approved for a mortgage. Most realtors recommend pre-approval for mortgage before even looking at homes for sale. But what is pre-approval and how do you get it? Don’t worry – we’ll explain everything in this blog post.
What is Pre-approval?
Pre-approval simply means that you have been approved for a mortgage rate ahead of time. This process allows you to find out what types of mortgage, and how much of a mortgage loan, you would qualify for. This helps narrow down the homes you will want to look at.
How Long Does Pre-approval Last?
Pre-approval for a mortgage does not last forever and most expire 90 days after being offered. This means you’ll want to get pre-approved when you are ready to purchase a new home, just as you start looking. You do not want to wait until you’ve found the home of your dreams to try and get pre-approved only to find out it’s outside your purchasing power.
Pre-approved vs. Pre-qualified
Pre-qualified may sound like pre-approved, but they are very different. Generally, pre-qualification requires a lender to check your credit and briefly look into your finances before telling you what mortgage you will probably qualify for.
Pre-approval, on the other hand, is much more finite. These are actual offers of loans from specific lenders. To find out your pre-approval rate, you will fill out a mortgage application and the lender will verify the information, as well as perform a credit check. If you’re approved, you will receive a pre-approval letter. That’s where things get exciting!
Steps to Take Before Filling Out a Mortgage Application
Check your credit score. Lenders tend to like to see scores of 740 or above.
Check your credit history and make sure to look for any errors you might want to dispute.
Determine your debt-to-income ratio, or DTI. This is the amount of your gross monthly income that is dedicated to paying back debts. Generally, lenders like to see this amount, including the potential monthly mortgage payment, under 36% of your total monthly income.
Gather your proof of income. This can be two years of either W2s, paystubs, or 1099s. Those who are self-employed can submit two years of income tax returns. Additionally, if your down payment is going to be gifted to you (say, by a parent or other relative), you’ll want to make sure you have a paper trail handy for the lender.
When applying for pre-approval, make sure to talk to a few lenders before choosing who you would like to go with. Many homebuyers who shop around can save nearly $500 in interest in their first year of homeownership. Compare your options. Local lenders may be able to help approve an application that once had barriers, while larger lenders might be able to get better rates. It helps to shop around before committing to ensure you are getting the best mortgage possible.
