Before You Shop - Pre-Approval
Why Should You Get Pre-Approved for a Loan?
Getting pre-approved for a loan will give you an idea of what home pricing you can afford. This helps you search for homes that are truly in your range. A pre-approval letter also shows real estate agents and sellers that you’re a credible buyer and are ready to act fast. Some sellers even require buyers to submit a pre-approval letter before allowing home showings, and many request them with an offer.  Also, if you make an offer on a house without a pre-approval letter, your offer may not be taken as seriously as an offer from someone who's already pre-approved.

What's Required in the Pre-Approval Process?
A lender will ask for some basic information about you and your financial history. If you've got another person on the loan (co-borrower), the lender will need the same information about them, too. Most lenders request social security numbers and permission to pull your required credit report. If your credit report satisfies their guidelines, they'll make a preliminary determination in writing stating that you would qualify for a particular loan. (Of course, each lender has its own standards and processes for determining whether to grant a pre-approval letter.)

What If You Can’t Get Pre-Approved?
If you're not able to get pre-approved for a mortgage, there are a few things you can do to work on this.
  • Improve your credit score. Your credit score is impacted by payment history, outstanding debt, the length of your credit history, recent new credit inquiries, types of credit used, and more. Generally a score of 720 and higher will get you the most favorable mortgage rates.
  • Correct any errors on your credit report, which could raise your credit score. The lender will analyze your credit report for any red flags, such as late or missed payments or charged-off debt. Even if you have "bad credit", there are ways to still get pre-approved for a mortgage.
  • Decrease your overall debt and improve your debt-to-income ratio. In general, a debt-to-income ratio of 36 percent or less is preferable; 43 percent is the maximum ratio allowed. The following link has a debt-to-income calculator to figure your debt-to-income ratio:  www.mortgagecalculator.org/calcs/debt-ratio.php
  • Increase your down payment amount in order to qualify for a larger loan. 
Talk with your own lender for more tips to improve your chances of qualifying for a loan.
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Source:  www.zillow.com/mortgage-learning/pre-approval/