A common question asked by potential home buyers is: When is the perfect time to get a mortgage preapproval? When we find our dream home and are ready to submit an offer; or months before when we start to think that we are ready to purchase?
My recommendation is as follows:
You should sit down with a mortgage broker when you start to think you want to purchase a home. During the preapproval process, your mortgage broker will review your financial situation which includes your credit, income, and how much you have for a down payment. Based on these 3 factors we can determine what you can afford.
When looking at your credit, we must determine that you have enough. Lenders like to see at least 2 trade lines, e.g. credit card and car loan, that have been active for at least 24 months.
When reviewing your income, we review if you’ve completed your probationary period? Do you have guaranteed hours? If you work a number of part-time jobs, how long have you been at each one? If you are self-employed, can you confirm a 2 year history?
Your down payment is generally the biggest bump in the equation. How much you have saved is a big determining factor as your purchase price, although this doesn’t mean you can afford that price. In all situations a minimum down payment of 5% is required.
The perfect time to do a preapproval is right now, this way if the factors above are not in place, we can make the adjustments before you start to look for your dream home.