In the Greater Chattanooga area, real estate agents recommend buyers obtain a pre-approval letter from a lender before shopping for their dream home. For a pre-approved home loan, you first need to go through a mortgage pre-qualification. Lenders will ask you about your income, assets, debt, and credit. In addition to running your credit score, lenders will ask to see proof. This information helps lenders determine two factors: 1) if you qualify for a loan and 2) if so, for approximately how much money. Even if you are confident about your income and credit, most Chattanooga realtors will only work with you if you have a pre-approval letter. This allows them to search for homes in or near your price range.
Steps to Get Pre-Approved for A Home Loan
Here are some vital steps which would help you get pre-approved for a home loan:
Check Your Credit Score for Free
You can get your credit score checked to see where you stand when applying for a mortgage loan. On average, a minimum score of 620 is recommended but having a higher credit score will benefit you and would get you the best mortgage rates. If your credit score is above 740, you will typically have the best mortgage rates.
I recommend signing up for Credit Karma and installing its app on your smart phone. Its service is free to use. You can also check your credit score as much as you want on Credit Karma without having a negative impact. Furthermore, you should consider utilizing the Annual Credit Report service; you can obtain a free copy of your credit report every year from each credit reporting company. This is recommended to confirm your information stays accurate.
Check Your Credit History
You need to check your credit card history and review all the reports. Moreover, you can dispute any errors as well. If you are having a problem with creditors or delinquent accounts, it is better to resolve these before applying.
Calculate Debt-To-Income Ratio
You must calculate your debt-to-income ratio. Debt-to-income ratio is just that; it is a ratio that takes your salary and debt (e.g., student loans, car loans, credit card loans, etc.) into consideration.
Lenders keep a keen check on the debt-to-income ratio. They prefer people with a debt-to-income ratio of below 35%.
Gather All the Information You Can About Yourself
This might include your social security number, your employment details, your work history, and your current (and past) address. You might also need a bank statement, proof of income, and salary slips. During the pre-approval process, you might also need to submit your W-2 file.
Chattanooga lenders prefer people who have a consistent income or job for more than two years. If a person is self-employed, then he/she will need to provide proof for two years of income tax return documents.
Contact More Than One Lender
Although contacting more than one lender can be daunting and time-consuming, it is in your best interest to shop around with several lenders to ensure you are getting the best financial partner for your current situation. This could save you a lot of money! Shopping around with other lenders within a 30-day period won’t have any further impact on your credit score. By request, I can recommend several lenders in the Greater Chattanooga area whom I have personally worked with.
Overall, following the above-mentioned should provide a jump start to get you prepared for a loan. In case of further queries, feel free to contact me.