Top 10 Tips: Getting Better Mortgage Pre Approval

Are you navigating an unfamiliar path?... The mortgage pre-approval process is often the first major hurdle that you should solve and take off from your head. I totally get it if you're feeling uncertain or even a little confused by all the steps involved in this process. But I have some good news for you. With the right steps in place, you could turn that stress into confidence, and in the end, you might even secure a better mortgage pre approval deal that exceeds your expectations.

 

I’m here to guide you through the process, step by step, to help you go from just a “pre-approval” to a “better pre-approval.” If you read this article till the the end, you will find yourself in a well position for a smoother, more successful home buying journey.

Pre-Qualification vs. Pre-Approval: What’s the Difference?

When you start your home-buying journey, you’ll likely encounter the terms pre-qualification and pre-approval. There is a difference between them you should know:

 

• Pre-Qualification: This is the fast, free first step that most homebuyers take. Here, you will actually provide information. You’ll provide basic financial information, and the lender will give you an estimate of how much you can borrow. While it doesn’t guarantee you approval, it’s a great way to get a sense of your budget and show sellers you’re serious.
• Pre-Approval: This is a more in-depth process where your financial details are fully reviewed. In pre-qualification, you provided information; now, in this process, the lender will ask for the documents they need to give you a pre-approval. It carries more weight but takes longer and is typically required when you’re ready to make an offer. But if you already have all your documents ready, it may take only a few days to get a better mortgage pre approval.

 

If you’re just getting started, pre-qualification is the quickest way to see where you stand, and it’s fast and completely free. You can go here to get pre-qualified now and take your first step toward homeownership!

Why A Better Mortgage Pre Approval Is So Important For You?

I know what you are thinking right now, “Why do I even need mortgage pre-approval?” The simple answer would be, 'Pre-approval is the key to making your home buying process smoother and faster.'

 

Without it, you would be possibly walking into a home-buying experience without a map. Pre-approval shows sellers and agents that you’re not just window shopping; you’re serious and capable of closing a deal. It's one of those hacks you should apply to buy your first home. You can check these 8 Hacks To Buy Your First Home.

 

You should read this: according to recent data from the National Association of Realtors, 85% of home buyers find that pre-approval speeds up the home-buying process for them. And 33% of them even said it gives them an edge when bidding on properties in competitive markets. Pretty compelling, right?

Tip 1: Clean Up Your Credit Score. To Get A Better Mortgage Pre Approval

If I am not wrong, you already know how important your credit score is in the process of getting a better mortgage pre approval and what rate you’ll get.

 

But did you know that a small change in your score could make a significant impact on your mortgage rate? A 100-point improvement in your credit score could save you thousands over the life of your loan.

 

What You Can Do to Improve Your Score:

 

• You Should Check Your Credit Report for Mistakes: Over 20% of Americans have reported errors on their credit report. So, the first thing I would recommend is that you should get a copy of your report and look for any errors. If you find anything that doesn’t look right, dispute it with the credit bureau. Check your credit report here www.annualcreditreport.com.
• Buddy, Paying Your Bills On Time Matters: Your payment history responsible for around 35% of your credit score. Yes, you heard me right. If you’ve been late on payments in the past, I would recommend that you work on paying your bills on time from now on. Even setting up automatic payments can help you.
• You should reduce your credit card balances: Experts recommend that you should aim to use less than 30% of your available credit. So, if you have a credit limit of $10,000, you should not try to carry a balance of more than $3,000.

 

If you improve your credit score, you’re positioning yourself for better mortgage pre-approval, and you could potentially see better interest rates as a result. It could be better to talk with an expert if you want to understand your credit score better. Here, Bill Hudson has 27 years of experience in this industry.

Tip 2: You Should Save For Larger Down Payment

What If I tell you that when it comes to mortgages, putting down more front can make a big difference for you? Let me explain it to you. Do you want to avoid PMI(private mortgage insurance)? To avoid this, you may need to put down 20%, which typically adds an extra $100–$200 to your monthly payment. Now, imagine how much you could save over the life of your loan if you avoided that extra cost.

 

How You Can Make Your Down Payment Faster:

 

• You Can Cut Back on Non-Essential Spending: If you’re serious about getting a bigger down payment, you should start looking at where your money is going. When you start cutting back your small, daily expenses like your daily coffee habit, it could free up hundreds of dollars every month. Over time, it adds up.
• What About Automate Your Savings?: I recommend setting up an automatic transfer into a high-yield savings account. When the money comes out automatically, you won’t even notice it’s gone, and your savings will grow faster than you think. You will thank me later!
• You Can Consider Extra Income Streams: If you have the time and energy, a part-time job or side hustle could significantly boost your down payment fund. It can be freelance work or even selling items you no longer need; these extra earnings can help you reach your goal faster.

 

Remember, the more you can put down, the better your mortgage pre-approval will look.

Tip 3: You Must Manage Your Debt-to-Income Ratio

When lenders are deciding whether or not to approve you, one of the first things they’ll look at is your debt-to-income ratio (DTI). In simple terms, your DTI tells the lender how much of your monthly earnings goes toward paying off debt. The lower your DTI, the better your chances of getting approved for a mortgage.

 

Let me break it down for you. If your monthly debt instalments are $2,000 and your income is $6,000, your DTI is 33%. I often see that most of the lenders like to see a DTI of 43% or lower, though some may allow it to go higher, depending on the type of loan you want.

 

How You Can Improve Your DTI:

 

• Pay Down Your Debt Can Help: The more debt you pay off, the lower your DTI will be. You can focus on high-interest debt, like credit cards, first. It can reduce your DTI, and it will also save you money in interest.
• Avoid Taking on New Debt(you must remember this): If it is possible, you can try to hold off on taking out new loans or opening new credit accounts while you’re in the process of getting pre-approved. This can help you keep your DTI low and make you look more financially stable to lenders.
• Increase Your Income(do your best): If you're able to boost your income, whether through a raise, a new job, or side hustles, it’ll help you lower your DTI.

 

The lower your DTI, the easier it will be for you to secure better mortgage pre-approval and get the loan. You can check these 5 insider secrets of home loans revealed by NAR(National Association of Realtors) that definitely remove your stress and allow you to get loans easily.

Tip 4: Have Your Financial Documents Ready

 

I can't stress enough how much time you’ll save by getting all your financial documents in order ahead of time. Lenders may ask you for things like:

 

• Your Tax Returns for the last two years
• Pay Stubs for the last few months
• Your Bank Statements for your checking and savings accounts
• Proof of Other Incomes You Have (if applicable)

 

The quicker you can get these documents together, the faster the pre-approval process will go. I’ve seen homebuyers who were prepared with their documents get pre-approved within a few days, while others took weeks because they were scrambling to find the paperwork.

 

Tips for Organizing Your Documents:

 

• You can create a digital or physical folder, and keep all your mortgage-related documents in one place. This can help you remain organized and ready for any requests from the lender.
• You should double-check everything. Lenders will scrutinize your documents, so you should make sure all information is correct. If you provide inaccurate or incomplete documents, it can delay the approval process. So, double-check everything!

Tip 5: Experienced Mortgage Broker Can Make Huge Difference

Everybody wants the best deal. In this case, no difference to you, I guess. I would say if you want the best deal, you should consider working with a mortgage broker. A good broker has access to multiple lenders, and they can help you shop around for the best rates and terms. With their years of experience, they can guide you through the procedure and assist you avoid any potential pitfalls.

 

Why a Mortgage Broker Could Be Your Secret Weapon:

 

• You Will Have More Loan Options. Brokers often have relationships with a wide variety of lenders, so they might be able to find loan products for you that you wouldn’t have access to on your own.
• They Understand the Market. A good broker understands the ins and outs of the mortgage market, and this may help you navigate it with ease.
• They Can Save You Time. You don’t have to spend hours researching lenders or mortgage products on your own. A broker does that for you, ensuring you get the best options available.

Tip 6: You Should Consider the Timing of Your Application

Did you know that the timing of your mortgage pre-approval could impact your loan? It’s true! While you can apply at any time, certain times of the year might offer better opportunities than others.

 

For example, in the fall and winter, lenders may have less traffic, meaning they have more time to give you personalized attention. Additionally, you could avoid the crowded market that happens during the spring and summer.

 

How Timing Affects Your Approval:

 

• Interest Rates: If rates are expected to rise, it might be smart to apply for pre-approval now before they climb.
• Market Conditions: If the market is competitive, being pre-approved might give you an edge when bidding on homes. When the market is competitive, and you get your favourite home, you may not have enough time to get approved first before you make an offer. How? The buyers who would be already pre-approved might give an offer before you.

Tip 7: Avoid Major Financial Changes

If you’re in the middle of the mortgage pre-approval process, you may not realise how much a minor financial change can throw everything off. In fact, even small shifts in your finances can impact your ability to secure a mortgage or get a better mortgage pre-approval. Here’s why it matters and what you should avoid.

 

What Changes Should You Avoid?

 

• Are you planning to change your job?: If you’re considering a job change, you might want to hold off until after your pre-approval is complete. Lenders love stability. If you switch industries or your salary drops, it could raise a red flag. Experts suggest that someone should keep a steady job for at least two years in the same field.
• Making Large Purchases: I know it can be tempting to buy that new car or go on a shopping spree, but doing so while you’re waiting for pre-approval might hurt your chances. Large purchases could raise your debt-to-income ratio (DTI), which lenders can use to assess your ability to repay. For example, your DTI should ideally be below 43% for most loan types. A sudden increase in debt could push you over that threshold.
• Co-Signing Loans: You might be asked to co-sign a loan for a family member or friend during this time. While it’s an act of kindness, it could hurt your chances of securing your mortgage. This is because lenders will include any co-signed debt in your DTI, which could make it more difficult to qualify.

 

I hope that you get it now! If you stick to your financial stability throughout the process, your chances of getting a pre-approval could be increased. If you make a significant change, it might delay or even derail your pre-approval process. Staying steady and maintaining a clear, consistent financial path will only work in your favour when it's time to apply.

Tip 8: Get Pre-Approved, Not Just Pre-Qualified

I believe that I have already explained the difference between pre-qualification and pre-approval. If you're serious about getting a better mortgage pre-approval, here's why you should aim for pre-approval.

 

Pre-Approval: The Real Deal

 

The lender may ask for a detailed review of your financial documents, a credit check, and confirmation of your financial history. The result? A pre-approval letter that clearly outlines how much a lender is willing to loan you.

 

This can give you a serious edge in the home-buying process. Think about it: When you have a pre-approval letter in hand, you show sellers you’re serious and capable of closing the deal. You could also benefit from:

 

• Stronger Negotiation Power: If multiple offers are on the table, sellers might lean toward yours because they know you’re already pre-approved.
• Faster Closing: Since much of the paperwork is already in place, the closing process can move quicker, reducing stress.
• More Accurate Budgeting: Pre-approval gives you a clear idea of what you can afford so you can shop for homes without overextending yourself.

 

If you’re ready to move from just looking to serious buying, I recommend getting pre-approved rather than just pre-qualified. You’ll find yourself in a stronger position to secure a mortgage, and in many cases, you’ll likely find that your pre-approval opens doors to better deals.

Tip 9: Don't Stick To One Loan Option

If you are able to understand the variety of mortgage loan types out there, it can help you to make the difference between settling for a good deal and securing an exceptional deal. Why you should consider different options:

 

Types of Loans You Should Consider:

 

• Conventional Loans: These are the traditional loans that most people think of when buying a home. The government does not back them, but they offer the most flexibility in terms of down payments and loan amounts. They’re best for those with higher credit scores (generally over 620) and larger down payments.
• The Federal Housing Administration backs FHA Loans loans. And they are designed to help first-time homebuyers or those with less-than-perfect credit. The down payment requirements are typically as low as 3.5%, which could make homeownership more accessible if your credit score isn’t perfect. If you want to buy a home with an FHA loan, you should read this article where we provided a full guide.
• VA Loans: If you’re a veteran or active service member, VA loans are one of the best options you might consider.  This could be the perfect solution if you qualify because it has no down payment and no private mortgage insurance (PMI)

 

If you know your options, it can help you choose the right loan that fits your financial situation and goals. It will give you better clarity on how much you can borrow. It can also help you secure better mortgage terms. If you’re unsure about which loan is best for you, doing a bit of research now could pay off big time down the road.

Tip 10: Understand Your Lender’s Requirements

Let me explain to you how important it is for you to understand the lender's requirements before the pre-approval process. While many lenders follow similar guidelines, some may have stricter criteria, and understanding them ahead of time can help you prepare and avoid surprises.

 

These common things a lender requires:

 

• They will check your credit score. Most lenders expect a minimum score of 620 for conventional loans, but some government-backed loans (like FHA and VA) are more flexible and may accept lower scores. If your score is below this threshold, you could consider applying for an FHA loan, which might accept scores as low as 580.
• They will verify your employment history. Lenders typically want to see at least two years of stable employment in the same industry. Job-hopping could make it harder for you to qualify, so if you’re considering changing jobs, it might be wise to wait until after your mortgage is secured.
• They will verify your income. You would need to verify your ability to repay the loan. Lenders will need proof of your income, which usually includes pay stubs, tax returns, and bank statements. Having these documents ready will streamline the process and help avoid delays.

 

The more you understand your lender’s expectations, the better prepared you’ll be to meet them. All I am saying is meeting these specific criteria could boost your chances of getting better mortgage pre-approval, leading to more favourable loan terms.

Are you ready now?

As you can see, you should focus on your credit, your down payment, your debt-to-income ratio, and your timing to get a better mortgage pre approval. Eventually, you’ll be in an excellent position to secure a mortgage that fits your needs. You’ve got the tools to succeed, it’s just a matter of putting them to work. Jump on it!

 

Remember, it’s all about being proactive and organized.

FAQs

1. How Long Does It Take to Get Pre-Approved for a Mortgage?

It typically takes a few days to a couple of weeks. It totally depends on how prepared you are and how quickly you can provide your documents.

 

2. Can I Get Pre-Approved If My Credit Isn’t Perfect?

Yes, but your interest rate might be higher. If you want a better interest rate, you should improve your credit score.

 

3. What’s the Minimum Credit Score for Mortgage Pre-Approval?

The minimum score varies by lender and loan type, but generally, you’ll need a score of at least 620 to qualify for most conventional loans.

 

4. Should I Apply for Pre-Approval With Multiple Lenders?

Yes, it’s a good idea to shop around. Just make sure all applications happen within a 30-day window to reduce the impact on your credit score.

 

5. Can I Still Get Pre-Approved If I’m Self-Employed?

Yes, you can. You might need to provide additional documents like tax returns or proof of income, but self-employed individuals can definitely get pre-approved.