You need a loan pre-qualification if you want the home buying process to be easy. In today’s seller’s market, buyers have to do everything possible to set themselves above the rest. Without a pre-qualification the chances of a seller choosing you over others are slim.
So how do you get pre-qualified? It’s a lot easier than it sounds.
Check your Credit
Before you talk to a lender, know where your credit stands. Pull your free credit reports or sign up for a free service like Experian. You could even ask your credit card company or bank if they offer free access to your credit scores and reports – most do.
Look at areas you can improve. For example, if you have any late payments or overextended credit cards (over 30% of your credit line), fix them. Get your late payments current and pay down your debts.
Pay your Debts Down
Make sure your debts are manageable. You need to fit a mortgage payment into your debts while keeping your debt-to-income ratio at 45% or less.
If you have a lot of debt, pay it down or off before applying for a loan. You’ll have a better chance of qualifying.
Stabilize your Income
Lenders want to see a 2-year stable history of income and employment. If you changed jobs in that time, it’s okay, but try to keep it in the same industry. Lenders like reliability and stability. If you changed jobs AND industries, be prepared to prove why you’ll succeed in it, such as specific training or going back to school.
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Choose a Lender and Receive your Pre-Qualification
Once you choose a lender, let them know you’re moving forward with them and you’ll receive your pre-qualification letter. The letter should tell you how much loan you can afford, at what rate, and what conditions you must satisfy to close the loan.
Shop for a Home
Once you have your pre-qualification letter, it’s time to shop for a home! This is the most exciting part and it’s a lot more exciting when you know what you can afford and that you’ll be able to get financing.
In today’s seller’s market, it’s important to stand out. Getting pre-qualified is the first step. Next, you’ll get pre-approved, and finally, move onto underwriting and closing your loan. Getting pre-qualified is the first step to your dream of homeownership.
Take it slow, find a lender that works with your situation and that you trust, and make the most of the process. Have some fun shopping for a home and securing the financing that will make you a homeowner this year.
