Smooth sailing on the home buying journey doesn’t happen by accident. When you’re ready to buy a home, you’ll want to be pre-approved for a home loan. Consider these steps to staying on course:
Take a close look at your finances. Determine the loan payment you can afford each month on top of your other bills. To maintain your current standard of living, your mortgage payment shouldn’t exceed 43% of your monthly income. Some might recommend an even lower percentage.
Knowing how much you can spend per month makes it easier for your real estate agent and loan officer to guide you toward a home and a mortgage you can afford. Create a budget and share the results. Take these steps:
Check your credit. By law, you can obtain one free credit report from each credit report company—TransUnion, Equifax and Experian—per year. You can request yours here: annualcreditreport.com. If you see something that doesn’t look right, ask to have it removed.
Learn about mortgage types. Your Citywide loan officer will consider the type of home you want and the assistance you need and tell you the types of loans you might be eligible for. For example, do you meet any of the following qualifications?
Get your paperwork together. Certain financial documents will be necessary for your mortgage application. Your loan officer can tell you exactly what you need, but the list will certainly include:
Fill out the mortgage application. The application will contain questions about certain aspects of your finances, such as your length of current employment and current assets. It will be reviewed and the information verified for accuracy. You may be asked for additional documentation as part of the approval process.
Get pre-approved. Mortgage pre-approval is a commitment from a lender to provide you with home financing up to a certain loan amount. You will have a letter stating that you have the money, credit history, and other credentials to buy a home up to that price.
A full review of income, assets, and credit will take place before a pre-approval is issued.
While it may seem like a painful process, you will have to do all the paperwork sooner or later anyway. Getting pre-approved for a mortgage before you make an offer on a house will help you stand out from the sea of other home buyers in a competitive housing market. You’ll have a head start on the competition and be able to shop for your dream home with confidence.