Streamline Your Buying Process: Essential Tips for Preapproval!

The biggest single mistake I see homebuyers make is trying to shop for homes without first being pre-qualified for a home loan. In fact, that’s usually one of the first questions any Realtor worth their salt is going to ask: “Are you pre-approved with a lender?” If you’re just starting the home buying process, chances are good that you aren’t yet. Today, I’m breaking down my top five tips to getting pre-approved for a mortgage loan that best fits your needs. On top of leading Nelson Home Group, the highest-rated Kansas City real estate team on Google, I’m also a licensed mortgage loan originator with NEXA Mortgage. I have the advantage of having seen this process as a home buyer many times, as well as from the perspectives of a real estate agent and a loan originator. Today, I’m peeling back the curtain. Stick around until the end because I’m going to share the biggest pitfall I see homebuyers fall into when getting pre-qualified so that you can avoid it.

1. Gather Your Documents Upfront

Save yourself a lot of time and headache by collecting most of your documents upfront. Usually, at a minimum, your lender will need:

Bank statements going back 60 days (the actual PDF statements, not just a printout from your bank’s online portal)

Pay stubs for the last 30 days

Two previous W-2s

The last pay stub for each of the two previous years (to show your total yearly pay breakdown, including overtime and bonuses)

If you’re self-employed or a 1099 contractor, you’ll also need two years of tax return documents. You’ll need these documents for each person on the loan. This can be a lot to track down, and it will take some time, so it’s not a bad idea to have everything available when starting the application process. Start early, double-check that you have everything, and get it to the lender as quickly as possible. They may need more information later, but having these documents ready will help your lender get you the best deal with the most accurate information and prevent any changes to your terms when unknown information comes up later.

2. Start Early and Shop Around

When you want to buy a house and need a mortgage, you need to make sure you start as early as possible to shop lenders and get pre-qualified. You don’t want to wait until your lease is 30 days from expiring—it’s too late. Give yourself time to gather all your documents and to check in with other lenders to find the right fit for you. You also want to give your lender time to run through as much of the process as possible. With enough time and the right information, your lender could finish the underwriting process for you, contingent on approving the home itself once you’re under contract. This is a huge advantage when negotiating with sellers in multiple-offer situations. This added time helps prove you as a solid buyer whose offer is unlikely to fall through.

3. Have a Contingency Plan for Your Credit Score

If you find out your credit score isn’t what you thought it was during the pre-qualification process, don’t panic. Online scoring programs like Credit Karma can give you a ballpark idea of your credit score, but they are only educated estimates. The actual credit bureau scoring models are copyrighted, so no one has the exact formula. Your lender will get a full picture when you apply and provide them with the necessary documents. If your credit isn’t where it needs to be, ask your lender for suggestions on how to improve it. They should be able to give you some basic tips to help you qualify or even bolster your score for a slightly better deal. Many lenders either have or work with credit rehab programs to increase your score quickly. Starting at least 90 days in advance will give you the best shot at mitigating risks early.

4. Save Up As Much Money As Possible

Before applying for a mortgage, save up as much money as you can. Ideally, you want to save for at least a 5% down payment. In Kansas City, you’ll also need roughly an additional $7,000 to $9,000 for closing costs, though these can vary greatly depending on lender fees, rate costs, insurance, and taxes. While you might be able to receive gifts from friends or family to help with closing costs, and sometimes negotiate the seller paying some of these costs, it’s challenging in the current Kansas City housing market. If you’ve saved as much as you can and are still short, don’t lose hope. There are 3%, 1%, or even zero down loan programs and down payment assistance programs available depending on your unique financial circumstances. Working on that pre-approval early will help you see what assistance you qualify for.

5. Understand That Qualifications and Interest Rates Are Flexible

Your qualification and interest rates aren’t set in stone based on rigid conditions. Factors like your debt-to-income ratio, financial reserves (bank, retirement accounts, and investment funds), and job history all play a role. Your credit score is just one piece of the puzzle. Once you’re pre-qualified, avoid making any changes to your credit without consulting your lender. This includes paying things off, opening new lines of credit, making large purchases, or transferring large amounts of money from one account to another. Always ask your lender before making significant financial decisions to ensure the terms around your approval remain the same.

Conclusion

There you have it—my top five tips for getting pre-qualified for a mortgage. If you would like to see what you can get pre-qualified for, including our zero down and down payment assistance programs, give us a call. If this raises more questions and you’d like to chat before applying, please shoot me a text, give me a call, or fire off an email. As always, if you’re looking to make a move in or around Kansas City, make sure to text or call. Let my team be your real estate and mortgage experts of choice. Until next time!