Lender Pre qualification

Lender Pre Qualification

Before you begin the home purchase process you need to get lender pre- qualification (unless you are paying cash). I suggest doing this BEFORE you even look for homes. You want to make sure you are looking at homes you can afford. Also, once you find the home of your dreams, you want to move fast on it. Most sellers will not consider your offer if you are not pre qualified. So let’s save you a lot of time and possible heart ache and get the ball rolling. So what is a prequalification and what will they look for?

  1. Your Credit Score – If you do not know it, find out. Try using sites like Credit Karma to get a basic idea. If a lender does a hard pull on your credit it will effect it, so know before you go. The scores they are looking for are between 580-800. The higher the score, the lower the interest rate.
  2. Employment – Are you able to pay the loan back? They will want to see steady employment history. Not a lot of job hopping. They will ask for pay stubs so have them ready.
  3. Tax returns – This will give the lenders the best idea of your income. Make sure you have 3 years of tax returns available.
  4. Debt to Income  – Do you have more debt that you do income. This is very important. In general, underwriting for conventional loans needs a qualifying ratio of 28/36. FHA loans are a little less restrictive, requiring a 29/41 ratio.The first number is the percentage of your gross monthly income that can go toward housing costs. This ratio is figured on your total payment, including hazard insurance, HOA dues, Private Mortgage Insurance – everything that makes up the full payment.The second number in the ratio is what percent of your gross income every month that should be spent on housing costs and recurring debt. Recurring debt includes credit card payments, auto/boat loans, child support, etcetera.

Click here for a more complete list of what they will look for.

You are free to pick which ever lender you like. Some lenders programs to help 1st time homebuyers with down payments and closing costs.

Here are a few lenders you can contact for pre qualification.

Again, you can use whomever you are comfortable with however, please reach out to a lender BEFORE starting you home search. It will make your life much easier. If you find you are not ready yet to get a loan, most lenders will guide on what steps to take to become ready.