Get pre-qualified for a home loan

The home buying process is not difficult if you prepare yourself. The first step to buying a home is getting pre-qualified for a home loan.  There are a few basic steps to getting prequalified.

1

¨      Locate a lender or mortgage broker you feel comfortable working with. A referral from a family member, friend, co worker or realtor is very helpful. It’s important that you speak with the prospective lender to see if you’re comfortable about working with the lender on your personal investment – buying a home.  

¨      Once you feel comfortable with the lender you will have to provide the mortgage lender with key information to get you pre-qualified. The standard information you will have to provide includes: gross monthly income, monthly payments on all debt and child support payments and any other financial obligation.

¨      Your mortgage lender will review the information you provide to determine your debt to income ratio. To get the best rate your ratio should be under 36%. The lower your D/R the better position you’re in for financing.

¨      Once you have authorized your lender to order a credit report you’re moving forward with the prequalification process. A credit report will reveal your credit rating (known as your FICO score). This number is a credit scoring system used by lenders. The score is developed by using your information (employment history, occupation, length at residence, balance ratio on credit lines, the number of credit inquiries, age and established credit). Also included in this system is information about bankruptcy, foreclosure, judgments, collections against you and slow pay. There are several tiers in the FICO rating system. A FICO score of 680 or better is considered “A” plus credit. This type of rating will place you in a position of strength when matching you with the best interest rates.  

¨       Once you’ve been pre-qualifed your lender will prepare a prequalification letter for you. This letter will serve as your official prequalification status. Most realtors will expect you to be pre-qualified before working with you. The letter will verify the loan amount you’re qualified for. This information will provide you and your realtor with establish boundaries for house shopping. The letter will also include a statement saying you credit information has been reviewed and you’ve been pre-qualifed based on credit, employment and financial information and lastly it will state this is not a guarantee for a loan.