You want to buy a house and you don’t have the cash, so naturally, your first step is to find a lender and see what type of loan you can get, right? Wrong.
While you do want to find a top-notch mortgage lender, there are a few things that you need to do before getting a loan, and it’s called getting pre-approved. While it doesn’t normally take a large amount of time to get pre-approved, there are definitely things you can do to speed up the process. Here’s the answer to the question “How long does it take to get pre-approved for a mortgage?”
Before you even think of getting a loan officer or real estate agent, take a few moments and pre-qualify yourself. This part of the process can take minutes if you have access to the internet.
Check your credit score.
First, you should check your credit score. Do this by going online to Credit Karma or Credit Sesame. Both of these websites offer a free credit report without running a hard check on your credit (a hard check reduces your credit score a few points).
The way these sites work is they take one of your credit scores (you have three) and give that to you along with an explanation. Most home loans require a minimum score of 620-640 to qualify for a loan. A few loans, such as the FHA loan, allow you to buy a home with a lesser credit score, but you’re going to need a good DTI ratio and provide a larger down payment.
If your credit score is lower, take a look at the explanation for the score. Often, you’ll find its unpaid bills or late payments. If you see anything on there that doesn’t make sense to you or isn’t something you recognize, call up the reporter. Disputing the charge may be an option, and it raises your credit score within a few days.
Determine your DTI.
If your credit score passes, then determine your debt to income ratio (DTI).
Here’s how you determine your DTI:
Take your monthly debt (ex. $2,000) and divide it by your monthly income (ex. $7,000). The result is your DTI ratio ($2,000/$7,000= 0.286 OR 28.6%)
Most lenders like to see your DTI hit below 36% with your mortgage included. If you hit anywhere below 25%, then you can move on feeling pretty confident about getting a loan. If you’re between 25% and 32%, you can proceed, but know you may have a more difficult time flying through the approval process.
Shop for a lender.
Ok, you’ve done the math, checked your score and you’re officially ready to move full speed ahead! Now is the time to go lender shopping. This part of the process shouldn’t take you more than two weeks.
Shopping for your mortgage loan is about more than knowing who’s going to approve you—it’s about comparing mortgage rates and shuffling through home loans until you find the right one for you.
For example: If you plan on only living in a house for a few years, you may not want to take out that 30-year mortgage you saw your parents finance. Instead, you might find a loan with a balloon payment is more the style of loan you need.
Talk to a few different lenders to compare the types of loans that fit your needs and get the best interest rates.
Do I need to get pre-qualified?
Many lenders boast that they can get you pre-qualified over the phone. Pre-qualification is different than getting pre-approved, and is more of a pre-cursor to the pre-approval letter. Pre-qualification simply means you give your lender a rough estimation of your financial state and they give you a mortgage estimate based on those numbers. A guess for a guess.
You can really pre-qualify yourself by using an online mortgage calculator. They’re free, and they’ll tell you what the average individual in your financial situation can usually afford and get a lender approval for.
The short answer to the pre-qualification question is no—you do not need to get pre-qualified.
Getting Your Pre-Approval Letter
Once you find your lender, they’ll take you through a quick pre-approval process and get you a pre-approval letter. For this section, you’ll need to provide some financial documentation.
Your loan officer will ask for:
- Your last two years of tax returns
- Bank statements
- Social security number
- Pay stubs
Once they hand you your pre-approval letter, you can make an offer on a house feeling confident that it is within your budget. This process from when you find your lender to when you get your pre-approval letter is a matter of days. It’s really one of the fastest process in the home purchase process.
How long does the whole mortgage loan process take?
The entire home loan process takes anywhere from a few weeks to a few months, depending on your financial state and the loan you’re using. From making an offer, you’ll go to filling out a loan application, getting a house appraisal, and on to the automated underwriting process. That is the longest portion of the home purchasing process.
The best way to blast through the pre-approval, approval, and closing process of getting a home loan is to have all your financial ducks in a row. Make sure your credit is the best it can be (preferably higher than 640), your DTI is below 25%, and you have money available for your down payment and closing costs, and you should be on the road getting your house in no time.
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