by Charlotte Wood
(last updated February 21, 2009)
It's always exciting when you find that perfect house and you want to draw up the mortgage papers right away, however that whole bit about having to actually be qualified can be a roadblock. It doesn't have to be a stumbling point however if you know what to look for and what's important when qualifying for a loan.
You need to make sure you prequalify before the house hunt because then you'll really know what your price range is and what you can look at. To prequalify doesn't mean to start taking out a loan; it's simply to determine if you can afford to take out a loan and if you do qualify, how much you can afford.
When lenders look to see if you prequalify for a loan, they look at a few different things: your credit history, what size of mortgage you actually can qualify for, and the money you have to put down for a down payment and closing costs. All three of these factors go into determining your eligibility for a loan. When talking with a lender or broker you need to be completely honest about your financial situation because if you're not then it will come back to bite you later and you could be left with an unfortunate and sticky state of affairs. You'll need to provide information on any other outstanding debts you have, your gross income, any other financial obligations like child support or alimony, and the amount of cash you can initially put down.
Once you're prequalified you can then rest your anxieties a little bit because it's already been established that you can afford to get the loan. Don't mistake that, however, for actual approval; that comes later when you're actually applying for the loan. To ensure a better chance at getting prequalified you can make sure your FICO scores and ratios are up to par. If you have a credit score (FICO score) of around 680 or above and a debt ratio of 35 percent and below then you're in good shape from the lender's perspective.
While a prequalification isn't a guarantee of a loan, it is the first necessary step toward owning your own home. So just make sure your numbers are as good as they can be and you're honest about your situation and you should have no problem prequalifying for that loan that will get you into the home you want!
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