Why pre-qualify?
1) You will know how much house you can afford and prevent disappointments later
2) It gives the seller confidence that you have the funds to buy their property
3) It prevents snags that could potentially occur later in the home-buying process
Preparing to get prequalified can take a little effort on your part, but remember this will be one of the largest investments you will ever make. Doesn't it deserve some time? By implementing the actions below, you will be taking one huge leap toward getting that home you want.
1) You will know how much house you can afford and prevent disappointments later
2) It gives the seller confidence that you have the funds to buy their property
3) It prevents snags that could potentially occur later in the home-buying process
Preparing to get prequalified can take a little effort on your part, but remember this will be one of the largest investments you will ever make. Doesn't it deserve some time? By implementing the actions below, you will be taking one huge leap toward getting that home you want.
A. Gather and organize paperwork you will need to submit to lender(s). Having these documents in an electronic format makes it easier to share with lenders. If you need assistance getting them in an electronic format, let me know and I can assist you with the conversion. Most lenders will ask you to complete an on-line application. Once the application has been submitted, they will typically request the following items:
B. Calculate your debit-to-income (DTI) ratio. Your DTI is determined by adding up all payments you make (e.g. student loans, child support, rent, car payment, credit cards, etc.) on a monthly basis and dividing it by your monthly gross income (before taxes). Most lenders will want to see a DTI of less than 43%. Plus, the lower your DTI, the better your chances of qualifying for a loan and a lower interest rate.
If your DTI is high, consider paying down or paying off some of those debts before you apply for a home loan. Most lenders will offer suggestions on what you can do to improve your credit score. Some will refer you to a "credit repair" service. Be sure to ask them for their advice.
C. Know how much money you will need. You will need to know how much money you have for a down payment and how much you will need for closing costs. Of course, the more money you have to apply toward your down payment the less you will have to finance. Closing costs will cost about 3% of the purchase price, sometimes more. So, make sure you don't forget to add that cost as well.
D. Shop for a lender. Remember this is one of the biggest investments you will ever make in your life so shop around. Call more than one lender, at least three, and ask them questions. Remember they work for you and will be making lots of money from your business so ask questions and make sure you feel comfortable with them. If you don't already have a mortgage lender in mind, I can give you recommendations.
E. Select a lender. Once you select a lender provide them with my contact information and let me know who you selected. I will work closely with your lender from this moment until you close on your escrow.
- 2 years W-2s
- 2 years tax returns
- 2 most recent paycheck stubs
- 2 most recent months bank statements
- Copy of driver's license (for each person applying for a loan)
- Child support documents (court orders or documents demonstrating you no longer have a commitment)
B. Calculate your debit-to-income (DTI) ratio. Your DTI is determined by adding up all payments you make (e.g. student loans, child support, rent, car payment, credit cards, etc.) on a monthly basis and dividing it by your monthly gross income (before taxes). Most lenders will want to see a DTI of less than 43%. Plus, the lower your DTI, the better your chances of qualifying for a loan and a lower interest rate.
If your DTI is high, consider paying down or paying off some of those debts before you apply for a home loan. Most lenders will offer suggestions on what you can do to improve your credit score. Some will refer you to a "credit repair" service. Be sure to ask them for their advice.
C. Know how much money you will need. You will need to know how much money you have for a down payment and how much you will need for closing costs. Of course, the more money you have to apply toward your down payment the less you will have to finance. Closing costs will cost about 3% of the purchase price, sometimes more. So, make sure you don't forget to add that cost as well.
D. Shop for a lender. Remember this is one of the biggest investments you will ever make in your life so shop around. Call more than one lender, at least three, and ask them questions. Remember they work for you and will be making lots of money from your business so ask questions and make sure you feel comfortable with them. If you don't already have a mortgage lender in mind, I can give you recommendations.
- Questions to ask:
- What kind of downpayment assistance programs do you have?
- What is the interest rate for the types of loans for which I qualify?
- Will I be required to pay mortgage insurance? If so, how much will that cost?
- What are your fees?
- Do you offer any discounts? If so, what are they?
E. Select a lender. Once you select a lender provide them with my contact information and let me know who you selected. I will work closely with your lender from this moment until you close on your escrow.
