Follow these tips on how to get preapproved for a mortgage. Then, start shopping for the house you want to buy.
Before you apply, try to raise your credit score. Even if you already have a good credit score, the better your credit score is when you apply for preapproval, the better deal you'll get.
Improve your monthly debt-to-income ratio. Lenders base mortgage quotes partially on how much of your money goes to debt payments like credit card bills or student loans. The greater the percentage of your income you spent on debt, the smaller mortgage you'll qualify for.
Ask for help. The mortgage preapproval process can be confusing for first-time homebuyers. Ask your lender to share any information available that fully explains the process.
Understand what the lender is offering you. Make sure you understand all the terms of your mortgage. If you don't know what something means, the lender must explain it to you. The Truth in Lending Act requires all lenders to provide you with comprehensive loan cost information so you can comparison shop.
Don't get the biggest house you get preapproval for. If you have a mortgage preapproval letter for $300,000, don't feel obligated to take out a $300,000 mortgage. A smaller house can save you money on property taxes, utilities, and mortgage payments.
Ask your lender to adjust the preapproval letter if you don't need the full amount. For example, you've been approved for $225,000 and you find the house you want, but it costs only $190,000. Consider asking for an adjusted letter that guarantees only $190,000. When you show the seller your preapproval letter, he likely won't decide to ask for more money, which he might be tempted to do if he sees you're approved for more.
Time your preapproval. A pre-approval is typically good for 90 days. Wait until you're ready to start hunting for your house before you request a preapproval — otherwise, you're wasting both your time and that of the lender who's preapproving you.