Pre-Qualification – The First Step To Home Ownership
You have heard the expressions, “Do your homework” or “Do the research.” That is exactly what you are doing when you obtain a loan pre-qualification.
Before potential home buyers begin house hunting, they need to sit down with a lender to discuss key issues. In fact, Realtors will insist that before beginning the journey of house hunting, you talk to a lender to be prequalified. The pre-qualification results will save you and your Realtor valuable time. Also, it could turn out that you can qualify to purchase a higher priced home than expected.
During the pre-qualification, a home buyer learns about current interest rates, estimated closing costs, and that there are a variety of loan programs to evaluate before choosing the best options. Honolulu HomeLoans can guide the home buyer through the entire journey toward the goal of home ownership.
The first step in getting prequalified is to sit down with a loan officer to review credit reports and credit scores. The lender and home buyer need to review the credit report carefully to make sure it is accurate. Any credit problems should be addressed promptly because they could delay a purchase transaction.
Once the credit report is verified, the lender and home buyer can assess the factors that will determine the maximum amount of the prospective loan. The lender will need to know the home buyer’s gross monthly income and then will be able to determine how much debt they can manage by calculating their “debt ratio,” or the percentage of gross monthly income that goes toward paying existing debts and the proposed mortgage payment. The lender will require a debt ratio of 45% or less.
Next, the lender will examine the amount of cash the borrower will need to cover a down payment and closing costs. Whether it is their own cash or a gift from a relative, the down payment combined with their monthly income will determine the loan options available to the home buyer.
When you meet with a lender for a mortgage pre-qualification, you should provide the following: (1) most recent 30 days of pay stubs, (2) most recent W-2 forms, and (3) most recent bank statements. If you are self-employed, the lender will need to review your most recent two years of personal and business tax returns in order to calculate your adjusted net income. Having these documents at your meeting with the lender will expedite an accurate evaluation.
The key to a smooth home buying experience is to do the homework upfront, and the lenders at Honolulu HomeLoans are available to assist you with the first big step, pre-qualification.
Honolulu HomeLoans is currently offering a Purchase Promotion. Honolulu HomeLoans will be ready to close your mortgage loan within 30 days of receiving a complete application or you will receive a credit of $500. In addition we will provide a 1-Year American Home Shield policy toward the repair of appliances covered under the policy that breakdown.