So, you’re interested in buying a house. That is awesome. And probably not a decision you came to lightly.
But, now what? The first step in the mortgage loan process is speaking with a loan officer to obtain what is called a Pre-qualification or Pre-approval letter.
Here is an example of what that would look like:
This letter let’s realtors and homeowner’s know that you have started the process of getting a loan and are serious about purchasing a home.
To start, you will need to decide which mortgage loan officer and lender will best suit your needs. Just like you might check out different car dealerships before buying a car, you should also check out several mortgage companies before deciding which one you want to work with.
What you are looking for is someone who will take the time to listen to your questions, and provide answers that make sense to you. Also, know that no 2 lenders are exactly the same. They all have access to similar loan programs, but their rates will probably be a little different, and certain fees are usually a little different as well. If something seems too high or overpriced, check out a few other places in order to make a solid comparison. And, for the record, just because someone pulled your credit report does not mean you are locked into using them for the loan.
Once you have chosen the lender you want to work with and are ready to move forward with the pre-qualification, the loan officer will need to check your credit report and run some calculations on your income and assets, in order to see what loan program you might qualify for. You will need to be ready to provide your loan officer with some specific information and documentation. This would be:
- Your name, date of birth, social security number and address history.
- The name of your employer, your job title and work history.
- Your most recent pay stubs to verify income.
- W2’s for the last 2 years, or if you were in school or unemployed, have that information ready.
- Tax returns if you are self-employed or earning any social security or disability income.
- And also some asset statements to show you have the funds for the closing costs and down payment, though there are some ways to get assistance with those costs if you qualify.
Then you and any co-borrowers or co-signers will meet with the loan officer so they can look through all the information and determine what you could qualify for. You can meet in-person or over the phone, or even fill out an online application, whichever you are most comfortable with. The process is similar either way.
Basically the loan officer needs to look at 3 main things - your income and job history, your credit history and your bank statements, unless you will be applying for any of the assistance programs that are available. The loan officer will need to determine something called a debt-to-income ratio. To do this they take a look at your monthly gross income and divide that by your monthly debts, like your car payments and credit cards. This number is crucial for all mortgage loans as it helps define the maximum loan payment you could qualify for.
They will also go through your credit report and discuss with you any items or issues that might hinder your ability to obtain a loan.
In this meeting, it is important for you to ask questions, like:
- What should I expect for the loan process?
- How long will it take?
- Will I need an appraisal?
- What happens if interest rates go up or down?
These are all questions that an experienced loan officer will be able to answer for you. At the end of the meeting you should be able to leave feeling comfortable with the products being offered to you, and have a clear understanding of the monthly payment for the mortgage, the estimated down payment and closing costs you will be responsible for, and what to expect moving forward.
Then, once you have the pre-qualification letter, it's happy house hunting. But remember to keep in contact with your loan officer and send them a copy of the purchase contract as soon as you have chosen a home.
That’s about it for the pre-qualification process. Thanks for reading and be sure to check out the rest of our blogposts on the mortgage loan process. From start to finish, we have you covered.
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