5 Vital Things You Need For Mortgage Loan Pre-Approval

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If you’re thinking of buying your very first home, there’s a high chance you’ll need a mortgage loan to obtain this type of asset. With this high cost of housing, most of us simply can’t afford to buy a home with cash. 

 

With this, your focus should be on receiving pre-approval for a mortgage loan. And because too many application rejections will reflect negatively on your credit score and make it even harder to receive credit for anything, we’ve listed the five most crucial things you need for pre-approval. 

 

A Good Credit Score

Your credit score health can make or break your application for any type of credit. Lenders look at your credit score as a primary factor that determines affordability and the likelihood that you will pay back the debt. 

 

If your credit score is lower than what’s ideal, there are ways to improve it; pay debts on time, pay extra towards debts where possible, use some credit wisely, and keep credit reliance minimal. Moreover, avoid frequently applying for loans and credit because this drops a credit score reasonably fast. 

 

As soon as you get your credit score up, you can start browsing Tennessee real estate and homes for sale in other areas.

 

A Downpayment

Next, you’ll need a downpayment to secure the mortgage loan. Ideally, you must save at least ten percent of the mortgage loan total, but it’s even better to save a bit more. 

 

A Stable Income

Lenders will also look at your income specifics to determine affordability. With this, a stable income is essential. Freelancers and self-employed individuals sometimes battle to prove stability simply because their incomes can jump dramatically from one month to the next. 

 

So, if you aren’t a permanent employee with a stable monthly salary, consider opening two bank accounts; one for your funds to flow into and one to pay yourself a steady income on a monthly basis. 

 

Property Insurance

Most lenders will want you to have property insurance as a form of surety as well. So, beyond saving for a downpayment, shop around for property insurance to increase your chances of pre-approval. 

 

Proof Of Assets

Lastly, you’ll also need a few more assets to prove affordability. In addition to a downpayment and proof that you can afford the closing fees, it’s also essential to have a substantial amount of money saved. 

 

Ideally, it’s best to have at least six months of mortgage loan repayments saved in separate savings or individual investment accounts to prove that you won’t have any problems keeping up with payments, even if you hit a financial crunch. 

 

Otherwise, you can also list other assets that can prove affordability. Insurance policies, investments, other properties, or even vehicles can act as surety assets when applying for a mortgage loan.

 

Now that you have everything you need to apply for a mortgage loan, it’s essential to determine your affordability and then compare deals with different lenders. Moreover, it’s wise to apply only to one lender per month. Even if you receive a rejection, it’s best to wait another month before applying with a different lender to avoid negatively impacting your credit score. 

 

With that said, if you do receive a rejection, you can also consider applying for a specialty mortgage loan, which is a type of home loan for individuals that can’t obtain a traditional mortgage loan. 

Originally posted 2022-07-06 03:24:12.

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