Getting pre-approved for a mortgage is one of the most important steps when starting your home-buying journey! Not only does it give you a clear idea of your budget, but it also shows sellers that you're serious. But what exactly do lenders look at to determine if you qualify for a loan? Let’s break it down!
1. Credit Score 📊
Your credit score is one of the first things lenders check. A higher score typically means you’re more likely to qualify for better interest rates and loan terms. If you’re unsure what your credit score looks like, now’s the time to review it!
2. Credit History 📝
Lenders will also dive into your credit history to see how responsible you’ve been with past credit. This includes any late payments, existing loans, and how much debt you’re currently carrying.
3. Assets and Liabilities 💰
Your assets (like savings, retirement funds, and other investments) will be reviewed to ensure you can cover the down payment and closing costs. Lenders will also consider your liabilities, which include any current debts or obligations like student loans, car payments, or credit card balances.
4. Employment History 📅
Consistency is key here! Lenders want to see a stable employment history, usually over the past two years, to ensure you have a steady source of income. Changing jobs often can raise red flags, but stability and career growth are seen as positives.
5. Income 💵
Your income plays a huge role in determining how much you can borrow. Lenders will look at your gross monthly income, and that includes your salary, bonuses, commissions, and any other consistent income sources. This helps them figure out how much of a loan you can afford.
6. Debt-to-Income Ratio (DTI) 🔢
Your debt-to-income ratio (DTI) is a key number that lenders evaluate. It’s the percentage of your monthly income that goes toward paying debts. The lower your DTI, the better your chances of getting pre-approved. Most lenders prefer a DTI ratio of 43% or lower.
✨ Ready to Start Your Home Journey? ✨
Getting pre-approved sets the stage for a smooth home-buying experience and helps you find the best loan options available. If you’re ready to take that step, I’d love to connect you with one of my trusted loan officers who can guide you through the process!
Contact me today, Let’s start your journey toward homeownership today! 🏠💼
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bret@homeswithmerit.com
214-315-9465
