Understanding preliminary mortgage financing and the steps to take is an important part of the homebuying process. How much can you afford? How much do you want to spend? This depends on a lot of factors. How much you can afford is one thing but how much you want to spend monthly is another. Are you considering buying a condo, townhome or a home? Will you be paying Homeowner Association Fees?
How much money do you have set aside for your down payment? What is your current income to debt ratio? Looking for more information on that, check our post about Knowing Your Credit Score. Lenders and financial experts recommend that your monthly debts should be no more than 36% of your net monthly income.
Connecting with a mortgage specialist will help you put all of the puzzle pieces together and give you a better understanding of preliminary mortgage financing. An online mortgage calculator can help you with a rough idea of your borrowing power at current mortgage rates based on your income and your current outstanding debt, however, the best advice will come from a mortgage banker, broker, or lender and please know that every lender has access to different loan programs. One size certainly does not fit all here. One lender may be better suited to fit your needs than another. Do some research. Need advice on which lenders to check in with, give us a call.
Before meeting with any lender, gather some information. It will make the process much easier. The below, in addition to your credit report, will help the lender establish your debt to income ratio, buying power and your ability as a borrower to repay debts:
Social Security Number
W2 Forms (Previous 2 Years)
Pay Stubs (Last 3-6 Months)
Employment History Summary
Bank Statements (3 Months) + Creditor Information
Child Support Payments
Federal Tax Returns (2 Years) + Complete Record of Asset
Stocks, Bonds, Investment Account
Life Insurance Policies
Documentation of Other Income
Now that you have gotten some financial advice and understand your financing options, it makes sense to take this to the next level to make you a stronger buyer. Before you begin your home search in earnest, it is a good idea to get pre-approved for a home with. A pre-qualification is far different than a pre-approval. Be sure to take the time to go through the steps to get pre-approved.
Pre-Qualification is only a loan officer’s opinion that you’ll be able to obtain financing. No verifications are made, so formal approval is not issued and the loan officers do not make the decisions on whether or not a borrow gets loan approval.
Pre-Approval means your loan application has been taken through a rigorous procedure, including a review of your credit report. Pre-approval saves you the time of looking at houses you can’t afford. A pre-approval letter from a lender will also give you an edge when multiple offers have been made on a house. Pre-approved buyers are generally able to close on a transaction quicker since most of the paperwork has already been taken care of upfront.
There are a lot of great lenders out there. Here are a few of our favorites. Kim Pentrack at Wells Fargo, Tristen Hunt at Caliber Home Loans or Mark Irwin at Directors Mortgage.