Having your offer accepted on the house of your dreams only to discover you cannot obtain financing can be a devastating experience. It also means you will have wasted countless hours searching for a house to no avail. Pre-qualifying for a home loan mortgage will let you know in exactly what price range you should be looking when house hunting. This will help you avoid disappointment; when you do fall in love with a house, you will already know you can buy it. Pre-qualifying for a mortgage is a straightforward process.
Forecast your home purchase scenario. Using an online mortgage calculator (see Resources), plug in the requested information including the price of your desired home, your down payment and loan length. The calculator will determine your monthly payment. Going through this process will prevent sticker shock by letting you know upfront how much house you can buy for your desired monthly payment.
Check out your credit rating before attempting to pre-qualify. Instead of waiting for the lender to run a credit report and discover any negative information, you should obtain your credit report from each of the three main reporting agencies and examine each report for errors or issues. You can obtain free annual credit reports by visiting the Annual Credit Report website (see Resources). The three main credit reporting agencies partner to maintain the site for consumers. If you already used the site within the last 12 months and want more updated reports, you can contact each of the three agencies at their websites to request a new report; there will be a nominal fee. Once you receive your credit reports, correct any negative entries before taking steps to pre-qualify for a home loan.
Gather employment information. As of 2010, most lenders require a two year employment history. You will need proof of employment for the past 2 to 5 years for everyone who will be named on the loan. If your spouse/partner will also be responsible for the loan, or you live in a default community property state, you will need to provide your partner's income information as well.
Call or visit the lender of your choice. Asking friends for recommendations can help you locate a potential lender. Request a list from the lender detailing everything you'll need to submit for the pre-qualifying process. Once you have chosen a lender, you can also start the process online. Many lenders have online application templates that allow you to fill in the blanks and send it in to get the process started. Once the lender receives the application, a loan officer will call or email you with additional questions and to let you know what documentation you need to submit to complete the process.
Assemble a package that includes all items requested. Be prepared to explain any negative entries on your credit report.
Notify your employer that you are in the pre-qualifying process and that the lender may contact the company for income verification. Gather fax and phone numbers as well as email addresses that will help the lender contact the proper parties for such verification.
Submit the package with all requested information. Be sure to photocopy or scan each document, note and other record in the package so you will have a copy of it. Wait for lender to process the request. Be prepared to answer questions and provide additional information if requested.
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