In a report by the U.S. Department of Housing and Urban Development, there is a list of 9 steps to buying a home. The first 4 steps relate to becoming pre-qualified, during which you learn about all these things:
- Figure out how much you can afford.
- Know your rights.
- Shop for a loan.
- Learn about homebuying programs.
It is not till the 5th step that homebuyers should start shopping for a home.
In this video, Mary explains the process of pre-qualifying for a home loan, so that you are a qualified buyer who is taken serious by Realtors and homeowners when you begin your quest to find a new home.
Hello, I’m Mary Catchur. I’m the owner of Marimark Mortgage. If you’re in the market to buy a new home and thinking of going out to some open houses this weekend, it’ll be a good idea to get pre-qualified before you go.
Mortgage Pre-Qualification Process
A lot of people neglect to do this because they’re unfamiliar with the process and don’t know what to expect. But it’s really not a very difficult process and can usually be done even over the phone.
When you speak to your lender, they’re going to walk you through the loan application, and talk about issues such as your income and employment, the down payment funds that you’re going to use, they’ll want to pull your credit, and calculate a debt-to-income ratio.
Going into a little more detail on each of these to give you an idea of what to be prepared for. When you talk about your income and employment, they’re going to want a two-year job history including the name, address, phone number, dates of employment, and how you’re compensated in your job. How you’re compensated can be very important because the rules differ, whether you’re a W2 employee, 1099 or self-employed. So they’ll want to understand exactly how you’re compensated.
In looking at your assets, they’re going to want to know what liquid assets you’re going to be using for the down payment and closing costs. It’s also important to understand where these funds are coming from, because again, there can be unallowable sources. For instance, if you you’ve been saving money in a safe in your house, that may not be allowed for the down payment and closing costs. So giving them an idea of where the funds are currently, and what you expect to use for down payment and closing costs is really important. If you’re expecting a gift, that can also be important in understanding, to know which loan program you’re going to qualify for with a gift fund.
Also, they’re going to pull your credit. They’re going to pull from three bureaus, typically, and the lender will use the middle score of the three. But more important than your credit score sometimes, is also looking at the debts that are on your credit report. This allows us to calculate a debt-to-income ratio. The debt-to-income ratio is important to understand in qualifying for a loan, because the various loan programs may have different qualifying criteria. Many of the programs, such as government programs, can go up to over 50% debt-to-income ratio, whilst the conventional programs are going to be more restrictive.
The debt-to-income ratio is basically just a calculation of all your monthly obligations as shown on your credit report, including your credit cards, any mortgages, student loans, and the estimated payment of the home you’re going to be buying. We take that and divide it by your gross income, and that’s your debt-to-income ratio. Once we’ve completed that process with you, we’ll be ready to issue your pre-qualification to your Realtor. It’s important that you have that in hand when you go to make an offer on a property. With the market being very competitive these days, the sellers want to make sure that they’re accepting an offer from somebody who’s ready, willing, and able to buy.
Marimark Mortgage’s corporate office is located in New Tampa, and serves all of Florida, Virginia, and Pennsylvania.
As a mortgage originator, we specialize in conventional home mortgages, FHA, VA and USDA mortgage options, refinance loans, and reverse mortgages. We’ve also worked extensively with a variety of refinancing options to help clients lower their payments on their home.