It's easy to get caught up in the excitement of shopping for a new home before getting pre-approved. But by taking the necessary steps, you’ll streamline the buying process, delight your realtor, and gain a competitive edge in a competitive market.

Not sure where to start? We'll tell you everything you need to know about mortgage loan approval.

What is Mortgage Approval?

Financing a mortgage is a two-stage process:

Pre-Approval

During this initial stage, the lender provides a conditional agreement to lend you a specific amount of money to purchase a home. This is a critical step because it:

• Gives you a clear idea of how much home you can afford
• Shows your realtor and sellers that you are a serious buyer
• Gives you more bargaining power
• Ensures you lock in an interest rate, which may protect you from rate hikes

Approval

Approval is the formal process that happens once you’ve found a home and are ready to move forward with the purchase. This process is more formal than pre-approval. During the approval process, your lender will review your:

• Application
• Credit history
• Income
• Debts
• Bank statements
• And other financial documents

Streamlining the Mortgage Approval Process

To streamline the application process and boost your chances of mortgage approval:

Review Your Credit Score

While every lender is unique, most favor borrowers with credit scores of 740 and up. Remember, too, the higher your credit score, the better your interest rate and terms will be. That said, you can still get approved for a traditional loan with credit scores in the 600 range but at a higher rate. Those with credit scores as low as 580 may qualify for an FHA loan.

Analyze your Debt-to-Income Ratio (DTI)

DTI is the percentage of your gross monthly income that goes toward paying your monthly debt. In other words, it’s the ratio of income to debt that you have.

These debts typically include mortgage payments, car loans, student loans, child support, and other recurring bills.

Save for a Down Payment

Unless you qualify for a zero-down payment USDA or VA loan, you will have to produce a downpayment. Amounts vary with each loan. However, you should be prepared to contribute between 3.5% and 10% of the total loan amount for a down payment.

Organize Financial Documents

To get mortgage approval, you typically need to show:

• Proof of Income: W-2 forms from the past two years, recent pay stubs, federal tax returns from the past two years
• Bank Statements: From the last 2-3 months—for both checking and savings
• Assets: Documents for assets like real estate, cars, stocks, bonds, 401(k)s
• Debts: Credit card, student loan, vehicle loan statements, if applicable

Save for a Down Payment

If saving for a down payment in 2024 feels overwhelming, you should check out these five creative (and painless) ways to save. Trust us, they work!

Contact a Reputable Lender

Not all lenders are created equal—we can say that from personal experience. We're non-commission-based, which means our loan officers are motivated by your success, not by sales quotas or bonuses. This unique approach allows us to focus solely on finding the best mortgage solution for your individual needs.

JustChoice Lending: Your Mortgage Solution

Ready to start the approval process? So are we! With competitive interest rates, personalized assistance, and a commitment to your success, the JustChoice Lending team is here to guide you every step of the way. Contact us today!