Spring is here, and so is the busiest season in real estate. More buyers are out looking for homes, which means more competition for you. If you want to put yourself in the best position to buy, there’s one step you can’t afford to skip, and that’s getting pre-approved for a mortgage.
Some buyers think they can wait until they’ve found a home they love before talking to a lender. But in a season where homes can sell fast, that’s a risky move. Getting pre-approved before you start your search is a much better bet.
Here’s what you need to know about this early step in the buying process.
What Is Pre-Approval?
Pre-approval gives you a sense of how much a lender is willing to let you borrow for your home loan. To determine that number, a lender starts by looking at your financial history. Here are some of the things that can have an impact, according to Yahoo Finance:
Your debt-to-income (DTI) ratio: This is how much money you owe divided by how much money you make. Usually, you can borrow more if you have a lower DTI.
Your income and employment status: They’re looking to verify you have a steady income coming in – that way they feel confident in your ability to repay the loan.
Your credit score: If your score is higher, you may qualify to borrow more.
Your payment history: Do you consistently pay your bills on time? Lenders want to know you’re not a risky borrower.
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