The Factors That Determine Your Pre-Approval Amount

You're nervously gathering the documents to upload into a lender's portal, wondering if this will be enough to get pre-approved for the amount you want.    What determines your pre-approval amount? Will the information you give increase or reduce the amount you get?   All good questions, but let's get something straight:   Your pre-approval is decided by your income and anything that impacts it.    Lenders build a profile based on your record and finances to help them decide how much to lend you and the details of that loan.    So what are some things lenders factor in?   We at Savant Realty Group researched a list of items a lender will pull to build your profile and your loan amount. This profile includes (but is not limited to) your identification and background check, your employment history and tax returns, and your financial info.         Identification and Background Check   Lenders want to make sure that you are who you say you are and for any history.    If you have a criminal background, that should not deter you from getting a mortgage. Most lenders will still give you a loan as long as your finances show that you're not a high-risk borrower.    Some lenders may give you a higher APR% or deny you outright, but that is not as common.    We recommend that you shop lenders as every potential home buyer should. It allows you to pick the best pre-approval or leverage options to get the best deal.     Employment & Tax Returns  Lenders mainly check your financial health, and income is the first insight.    To get a good idea of your total income and its stability, lenders will review your employment history and tax returns.    Employment History    To get a clear idea of your employment history, lenders will look at your employment status, how long you have worked at the same company, and how much you make.    What lenders see:   Being employed shows lenders that you have a steady stream of income that comes in monthly   Having the same job for an extended period will let the lender know this employment and income will be long-term.   Lenders may ask for pay stubs from the last three months to ensure that income doesn't fluctuate.         Tax Returns    A lender may ask for your tax returns, especially if you are self-employed or have multiple sources of income.   Tax returns show your total income within a year, not just what you make from your day job.    Loan officers will require the last two consecutive years of your tax returns, so make sure you file taxes correctly and on time.     Financial Info The next part of your financial health that lenders look at is the details of your finances.   Lenders will look at your credit score, credit history, debt-to-income ratio, and savings & assets.    Credit Score  Your credit score will qualify you for different types of loans. At Savant Realty Group, we recommend maintaining at least a score of 640 or above. However, we have included the loans and the qualifying scores for each.       Credit scores will also impact the interest rate of your mortgage loan. Borrowers with higher FICO scores benefit from lower rates, thus spending less on repaying the loan.   Credit History  Lenders will also look at your credit history to get the full story behind your credit score.    Is your credit score on the lower end because you constantly max out your credit cards? Because you regularly make payments late? Due to accounts ending up in collections? All of the above? (source)    Or is it simply because you don't have enough credit history in the first place?   A mortgage lender will run a fine-tooth comb through your credit history to decipher what kind of borrower you will be. It solidifies their decision on whether to lend you money and the amount and rate to give you.    Debt-To-Income Ratio The Debt-To-Income Ratio is a ratio used by all lenders to evaluate your ability to make your monthly payments.    To determine your DTI, lenders take your monthly debt and divide it by your monthly income. They multiply that number by 100 to get a percentage. If the said percentage is under 36% when your DTI is determined, it's best.   Lenders use DTI to assess the risk of giving you money to buy your home.    Saving and Assets  Your lender will review your savings and assets to determine your net worth.    They will subtract the value of your savings assets from your debts to estimate how much money you have, so it's important to be forthright.    It also affords them a sense of security if you lose your primary source of income by showing you can continue to make your payments correctly and on time (source).          Conclusion So let's recap:   Your pre-approval amount is defined by your income and whatever impacts it.   Lenders will build and review a profile that creates a complete picture of this by looking over your identification and doing a background check, understanding your income through your employment history & tax returns, and comprehending what impacts that income by looking at your financial info.    It's your job that these factors boost your prospects of getting pre-approved for the amount you want.   If you're unsure where to start or want to contact a lender to either get pre-approved or develop a game plan, then schedule a time to speak with us.   We'll give you the advice and resources to make the best decisions throughout your real estate journey. 

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5 Proven Ways to Boost Your Credit Score

There's no dispute; when you're looking for a new home, your credit score matters.    Your credit score holds so much weight because it shows how well you make payments correctly and on time. The lower the score, the more you appear to be a risk.    Now, bringing up your credit score may be easier said than done, so we at Savant Realty Group researched tips that anyone can use to increase their score to the recommended 640 and above.   Become An Authorized User Becoming an authorized user on a friend or family member's credit card allows you to benefit from their positive credit history.   Find a person with a strong payment history and seasoned credit history, as those two factors make up 50% of how your credit is determined.    Understand that the primary cardholder is taking on the brunt of the liability of having an authorized user. They alone are responsible for all the payments, and they may have to pay a fee for you to be an authorized user.    The both of you risk having the other mishandle the account and bring down both scores (source).    When asking someone to be their authorized user, it's best to address the cons and develop a plan that you both will both follow to avoid them.    Sticking to a plan will make this route successful.    Lower Your Utilization All because you have a limit doesn't mean you have to hit it!   By maxing out your card, you risk your credit score dropping and your minimum payments increasing (source). And if you do it constantly, you present yourself as a high-risk borrower.   You want to get your utilization under 30% and aim to keep it under 10%.   If you find yourself constantly hitting your credit limit, but you can always pay it back by the due date, you may want to ask for a credit increase to reduce your utilization.    Make Payments On Time  If you're looking for a way to increase your credit and maintain it, then this is the tip for you.    Make your payments correctly and on time.   Payment History is the most significant component when determining your credit score, a whopping 35% alone.    You can take the first step by simply making your minimum payments on time.    You can take the next step by creating a budget that will bring your debt down and your credit score up and get you on track to hit other financial goals.    Visit A Credit Repair Specialist If you qualify, a credit repair specialist can help you improve your score quickly for a fee.    They're best for individuals who need to improve their scores quickly.    The specialists can show you precisely what is bringing down your score and dispute it on your behalf. The importance of them is that they will make these disputes correctly.    The only con is that based on the quality and reputation of these specialists, the fees may be on the higher end.    Keep Up With Your Score Some people have lower credit scores simply because they're not aware of what impacts them.    That can easily change when you regularly track your score, and you can get a credit tracking app like Credit Karma (which is free) to alert you when things change.    Apps that break down what impacts your credit score will help you make informed decisions in the future.    Conclusion Your credit should be over 640 for a smooth real estate journey.    If you want to improve your score quickly, you should reach out to a credit repair specialist or ask your family/friends if you can be an authorized user on their account.    To improve and maintain good credit, you want to get in the habit of keeping your utilization under 30% (10% is best!) and using credit tracking apps to stay aware of your score.    But above all, make payments correctly and on time.   If you need advice, resources, or want to make sure that you're on track to reach your real estate goals, schedule a time to speak with our team.    We'd love to hear from you!

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5 Components That Impact Your Credit Score

Credit scores are like your GPA for life.   They determine what doors open for you and frankly can put limitations on what you can do.    Housing is no exception.   When you're looking to buy a home, your credit is a factor lenders use and can affect how much you can borrow. When you're looking to rent, your credit will determine if your application is accepted or not.    But what makes up your actual credit score? How do the bureaus come up with those numbers?   This blog post will break down what goes into making up those three digits.     Payment History Your payment history is the most critical element considered when determining your credit score. It takes up 35% of the credit score.   It shows how you've paid the lenders that have given you a line of credit. This history includes accounts that are past and current. What makes up your payment history is (source): Payment information Any delinquent payments and how overdue they are/were The amount of money still owed on delinquent accounts or collection items The number of past due items on your report Adverse public records (e.g., bankruptcies) The amount of time passed since delinquencies, adverse public records, or collection items The number of accounts that are being paid correctly and on time.    Rule-of-Thumb: Try not to take more than you can afford and, above all else, make your payments on time.    Amounts Owed Your Amounts Owed is the second most crucial aspect of your credit score. It makes up 30% of your score.    It shows how many open accounts you have and how much you owe them. Having your Amounts Owed be a large number can make you look like a high-risk borrower or someone a lender or creditor would consider more likely to default on their loan.    Rule-of-Thumb: Make your payments on time, and don't open unnecessary lines of credit to keep the amount you owe low.    Length of Credit History The next element of your credit score is how long you've had credit and makes up 15% of your score.    Time is what bureaus consider with this component. They're looking at how long it's been since your first account was open.   Having less than two years of credit history will not give most lenders enough information to determine whether you are a high-risk borrower or not. More than seven not only gives them more than enough info, but it is the amount of time needed before most unfavorable details of your credit report "fall off" (source).    Rule-of-Thumb: Open your first credit account when you are ready (get a credit card or take out a loan) and guarantee you can make your payments on time.    Credit Mix The type of credit accounts you have open will impact your credit score. This component takes up 10% of what determines your credit score.   You can have two types of credit accounts: Revolving Accounts and Installment Accounts.    Revolving accounts have "flexibility regarding the amount paid monthly" (source). For the most part, it's the accounts that give you a card—for example, credit cards, store cards, gas cards, etc.    Installment accounts have a "require[d]... fixed payment each month" (source). These accounts are primarily loans—for example, student loans, mortgage, car loans, etc.    Rule-of-Thumb: Have a good variety of Revolving and Installment Accounts; make all payments on time.   New Credit Last but not least is your new lines of credit, which also make up 10% of what decides your credit score.    Bureaus are looking to see how many new lines of credit you have, and more specifically, how many you opened over a certain amount of time.     Having many inquiries on your account at one time (applying for a lot of credit cards or loans at once) sends up red flags to the credit bureaus.    Rule-of-Thumb: Get one line of credit at a time. Make all payments on time and build credit before getting another line of credit.  Resources If you're looking to start your real estate journey and your credit score is holding you back, then give us a call.   We'll get you in touch with one of our credit repair specialists to advise you and help you boost your score.   Call or Text us at 346-446-3428.   Conclusion Yes, your credit score can affect if you get into your preferred rental or how much you get pre-approved for on your mortgage loan.    However, if you know what influences your score well before your next purchase or lease, you will be able to turn your credit into something that will work in your favor. 

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