The Basics of the Pre-Approval Process

Everyone is looking for that edge when they search for a new home loan, and at Altius Mortgage, we’ll help you get it. One of the processes we encourage our clients to investigate thoroughly: Pre-approval.

Pre-approval is a process where you and a potential lender lay out many financial details, and the lender determines whether they’re confident in your ability to meet the requirements of a given loan and given mortgage rates. Let’s look at the financial elements under consideration during pre-approval, plus how it can benefit you in the long run.

Items Considered

When you meet with a lender, they’ll thoroughly investigate all your finances. This will include a credit check, plus an in-depth look at your base income compared with your monthly expenses.

One cautionary note: Don’t confuse the pre-approval process with the pre-qualification process. The latter is a much less formal procedure, and is really just a basic meet-and-greet with a lender – the latter is a real financial proceeding, and very few people who come through pre-approval unscathed will end up being rejected for a loan.

Pre-Approval Preparation

Before a pre-approval meeting, you need to make sure your finances are fully organized. This starts with credit score, for which there are easy tools online to monitor your current standing without raising the score itself. You also want a firm understanding of your income and expenses – any surprises during the actual pre-approval process could cost you.

Documents to Bring

There are a few specific documents to make sure you have when you meet a lender for pre-approval:

  • Personal information: Things like Social Security information and a form of ID will be required for lenders to run credit and other appropriate financial checks.
  • Income information: You’ll need two years’ worth of tax returns, pay stubs and W-2 forms. If you have any outside sources of income not reflected in these, you’ll need evidence of those as well.
  • Asset information: This includes any assets not listed as income, such as savings, investments or monetary gifts and loans.

There’s much more to learn about the mortgage process, and we’re here to teach you at Altius mortgage. Speak to one of our brokers today.

Keeping Credit Score High for a Mortgage

For people looking for the best mortgage rate possible on a big home loan, there are few factors more important than credit score. This basic measure goes a long way to determining everything from your rate to which kinds of loans you qualify for, and at Altius Mortgage, we’re here to help you keep it as high as possible.

What is a credit score, and what are some simple ways to keep it high before a mortgage search begins? Let’s take a look.

What is Credit Score?

Your credit score is a numerical representation of your creditworthiness. It’s based primarily on a credit report, which is sourced from various banks or credit sources. In the United States, credit score is generally from one of three main bureaus: Experian, TransUnion and Equifax. There are also a few different formats for calculating your score, which will vary from bureau to bureau. With a FICO score, the most popular form of calculation in the US, your score will range from 300 to 850.

Staying Organized

One of the biggest factors in keeping credit score up? Stay organized. Late bill payments or missed payments are one of the easiest ways to lower your score, and online banking makes scheduling payments easier than ever. Don’t miss out on a great mortgage rate just because you forgot a few payments.

20-10 Rule

Credit score can be ruined by basic mistakes in daily finances, but the 20-10 rule will help keep you organized. It states that you should never let credit card debt reach higher than 20 percent of your yearly post-tax income, and you should never use over 10 percent of your monthly income to pay down credit card debts. If you can go even tighter than this, even better.

Simple Debt

Credit can’t be raised unless you’re actively paying some debt, but there are low-risk ways to boost it here. If you’re capable financially, take on a few new debts which you know you can repay easily, and well before the due date – this could be something as simple as groceries or a small purchase. As long as you make payments on time, this can slowly help raise your credit back to where it needs to be.

Emergency Funds

Never be caught without funds for an emergency – try to always keep at least 15 percent of your credit open, or even more if you have a low open credit threshold. Being forced to max a card for an emergency can drop the bottom out of your credit score.

Want to learn more about credit score, or any other mortgage solutions? The mortgage brokers at Altius Mortgage are standing by to assist you.