Pre-Approval in Today’s Mortgage Market
“You need 20% to get approved for a new home loan in today’s market” – False!
“You need to walk on water to get a loan these days” – False!
There are many misconceptions about mortgage lending. While it is true that it is more difficult to get approved for a new mortgage loan today than it was in 2006 or 2007, it is not that difficult if you take the right steps and stay organized throughout the process.
Here are the three fairly easy steps involved in getting pre-approved for an Illinois mortgage loan today.
Step 1 – Credit report
We need to obtain your credit report. Typically, we require credit scores of 650 or higher. The median U.S. credit score (half of all credit scores are above, half below) is around 720.
Step 2 – Income evaluation
Do you make enough money to afford your new mortgage payment and all of your other debts? We typically use 40% of your gross monthly income (before taxes) for this figure. Example: if you make $5,000 per month and you have a $400 car payment and $100 credit card payment, you can afford a $1,500 monthly mortgage payment, in our opinion.
Step 3 – Asset evaluation
Do you have enough money for your down payment and closing costs? Typically, you need at least 3.5% to 5% of the sales price of a new home for a down payment and 2% to 3% for closing costs. That means you need at least 5.5% to 8% of the sales price of your new home to complete the purchase.
Obtaining a mortgage pre-approval for a home in Illinois, Michigan, Minnesota and Wisconsin is free and requires no obligation. For information, contact us below or at 708-531-8388.