Trudi Schuurhof

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Home Buyer's Guide

Exploring Your Mortgage Options

A Mortgage Approval Shows What You Can Afford

It can be tempting to start searching for a new home by browsing listings and scoping out potential neighborhoods. But before you fall in love with a house, you should get approved first. A mortgage approval will help you estimate your monthly payment and understand what you can afford. 

What’s an approval?

Why Getting Approved Is Important

Getting approved first has a few advantages:  

  • You and your real estate agent will understand what you can afford so you don’t waste time looking at homes outside your budget.  
  • You’ll be in the best position to make a strong offer on a house because the seller will know a lender already verified your finances.  
  • After your offer is accepted, you’re less likely to run into surprises that could slow down closing the loan.  

Keep in mind an approval is just the start of getting a mortgage. Once you find a house and make an offer, the house will need to pass inspections and be appraised by a third-party. Your approval amount could also change if your financial situation changes.  

What Lenders Review

Mortgage lenders typically look at three criteria when deciding on how much you can borrow: your assets, your income and your credit.  

Your Assets

Assets are items you own that could be turned into cash should the need arise. They include things like checking and savings accounts, stocks, real estate, personal property and more. Lenders review your assets to make sure you have some money set aside to make your mortgage payments after closing.

Your Income

Lenders review your income to ensure you can afford a monthly mortgage payment. They’ll also check your debt-to-income (DTI) ratio to make sure that the amount of debt you have doesn’t offset your income too much. Typically, a mortgage company will want to see you have a DTI below 50%.

Your Credit

Having good credit can help you qualify for a better interest rate because you’ve shown you’re a responsible borrower. Some mortgage lenders have minimum FICO® score requirements.  

Will getting approved affect my credit score?

Steps to Getting an Approval

Every mortgage lender has its own process for getting approved. At [MORTGAGE COMPANY NAME] we use the Power Buying Process™, which has two levels of approval.  

Prequalified Approval

The easiest way to get a Prequalified Approval is online through [MORTGAGE COMPANY NAME]. After you create an account, you’ll:  

  • Answer a few questions about your income and assets.  
  • Give us permission to pull your credit report.  

If you’re approved, you can download or print a Prequalified Approval Letter to share with your real estate agent to start house hunting.  

Verified Approval

With a Verified Approval§, you can strengthen your bargaining position before you make an offer. Verifying your finances will help you make a stronger offer because it shows the seller you are able to buy the home. A Home Loan Expert will verify your income and assets within 24 hours, and you’ll get a Verified Approval Letter listing the amount you’re approved to borrow.

How long is an approval letter good for?

How to Choose Your Mortgage Company

To get the mortgage that’s right for you, make sure you ask:  

  • What are your rates and fees?  
  • How much time on average do you take to close a purchase home loan?  
  • What is your client satisfaction rating?  
  • Will you service my loan after we close, or will you sell my loan to another company?
  • What’s your availability in case I have questions or need to get in touch?
  • Can we do this online or will I need a fax machine and stamps?  

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