Mortgage pre-approval just means you have a lender who checked your credit and debt-to-income ratio and decided you’re a good risk for a home loan. When this happens, you’ll get a letter of pre-approval to hand to a real estate agent so you can look at homes for sale. This shows them you’re a serious buyer ready to make a purchase. There’s no legal requirement to have a pre-approval letter before you search for a home, but it’s a lot easier to get an agent to take you seriously when you have one.
The State of the Real Estate Market
The real estate market is finally slowing down thanks to quickly rising interest rates, but the number of available homes on the market is still very low. It’s still a seller’s marketout there even though most experts are expecting home prices to hold steady or drop by as much as 4% in certain cities.
Even though interest rates are high now, the low home supply in most areas of the country is supporting the brisk market. What does this mean for you? If you want to beat other buyers to the sale and close on a home before they have the chance, you need to be pre-approved for a mortgage.
Preparing to Buy a Home
The process to get pre-approved starts months or even years before you file an application. Your credit needs to be in the “Good” range to get an affordable interest rate, so pay off any collections on your credit report and pay down your credit cards, student loans, and vehicle loans before you apply for mortgage pre-approval. Make sure creditors remove negative accounts from your credit report after you’ve paid them off, or at least ask them to show that you’ve paid off your debt.
If you aren’t sure what your credit looks like right now, take advantage of your right to one free credit report per year or use a free tool like Credit Karma. Lenders can also give you an idea of where you stand by doing a soft inquiry of your credit. Unlike a hard inquiry that lowers your credit score, a soft inquiry has no effect on your score.
Hard inquiries are done when you apply for credit, and they can lower your credit score a few points each time. Soft inquiries are the same type of inquiry credit card companies use to see if you pre-qualify for certain types of credit cards before they offer them to you. If you ask your lender, they can give you advice about how to improve your scores and make sure you’re approved when you do finally apply to pre-qualify for a mortgage.
Finding the Right Lender
Trustworthy lenders have a proven track record of helping customers get pre-approved for mortgages. The Potempa Team at One Trust Home Loans has more than 25 years in the mortgage lending business and have helped customers close on over $1 billion in mortgages in the last year. Whether you need advice about how to prepare to purchase a home, or you’re ready to pre-qualify for a mortgage right now, trust the experts at One Trust Home Loans to get you the financial products and services you need today to get into the home of your dreams tomorrow.