Table of Contents
- What Are Netting Escrows & How Does It Work?: The Best Guide - January 2, 2024
- The Secret About Prescriptive Easement: Top Guide 1 Must Know - December 4, 2023
- About Home Equity Loans In Texas And How Can One Obtain It - November 27, 2023
Tips to Get Mortgage Pre-Approval in Texas
When you are looking to buy a new house, a mortgage pre-approval is the first thing that you got to have, so that you can know what you are equipped with.
You might be in a position to buy a real estate based on your credit situation or you might not. Either way, we will learn how you can get a mortgage pre approval for buying a home in Texas.
It comes down to the fact that we have all these banks, and all of these banks are saying, “what programs do we have for you”.
All these programs are a little different from each other. Hence, it is essential to know that not every bank is created equal.
No matter how long you have been dealing with your bank, they might have limited options for you. That is why it makes sense to work with a mortgage broker, as they are affiliated with multiple banks.
If you are working with a loan officer who has access to many banks, he/she has a better chance of getting a mortgage pre-approval for your home purchase.
So all you need to make sure is that you cannot give up as the lending process could be discouraging, especially when you are getting denied for a loan from banks because if you give up, you will never know what you are really capable of and what you could have done!
What Lenders Look For Before Giving A Mortgage Pre-Approval
1: Debt to Income (DTI)
When it comes to giving you a mortgage pre-approval the banks are going to look at a few things.
The first one is the Debt to income ratio (DTI). They are going to look at what are your ongoing monthly obligations towards your car loans, credit card debts, student loans, etc.
And how much income you have leftover after you pay your bills. How much Debt do you have vs how much you make gives the Debt to income ratio? Your Debt to income ratio should be lower than 50 percent.
If it is above 50 percent, you are probably not going to get a mortgage pre-approval.
2: Occupancy Type
The banks are also going to look at what you have for a down payment on a property. If it is your primary residence, you can take advantage of three percent and five percent downpayment programs.
On a $200,000 house, three percent is $6,000. However, if it is an investment property, you have to make a down payment of 25%. There are two different banking systems for investment properties and primary properties.
Hence, lenders must know what kind of property you are planning to buy before they give you a mortgage pre-approval. The interest rates for a mortgage on a primary home is generally lower than that of an investment home.
3: Assets
Apart from these things, lenders would also like to take a look at your hidden assets like 401Ks, IRAs, any money that you have as equity in any other properties, money that you have in savings, etc.
Lenders want to know that because, after making the down payment, you still have to have three to six months of payments.
4: Credit Score
When you are getting ready to buy a home, it is essential to think about your credit score. Typically, to get a mortgage pre-approval in Texas, the lenders would require a credit score of 620 and above.
There are a few options for lower credit scores. However, 620 is typical.
If you are looking to buy a home, it would be advised to make sure you don’t make any big purchases, open new credit cards, and avoid any significant financial decisions or it would impact your credit and could drop your scores.
5: Down Payments
You got to have enough for the down payments whether it is 20% or 3%as well as 3 to 6 months’ worth of payments in the bank. Your down payment depends on the type of occupancy of the property you are planning to purchase.
Conclusion
Understanding the mortgage pre approval process can help you be more prepared and put you in a better position to get your future home loan approved. The mortgage pre-approval process can take some time.
Hence, it is advised to come as prepared as possible and start preparing your credit and accounts months in advance before applying for your home loan. It can save you and the lenders a lot of time for the process.
