So you’re thinking about escaping your renting situation and diving into the world of home ownership - but what is the first step? The answer is simple: pre-qualification!
What is it? In this step, you supply your lender with a snapshot of your overall financial picture, including your assets, debts, and all forms of income. You might be confident in your credit score, but this is the part where you are given a gauge of what you can be approved for based on the information you provide. Again, it’s not a sure fire deal. You don’t HAVE to buy a house, and it also doesn’t mean the lender agrees to give you this amount.
Why should I get pre-qualified? Getting pre-qualified is a great time to speak with a lending professional, free of charge, to discuss your financial and home-buying goals. The lender will explain the various mortgage products available and advise you on what options best suit your situation. Most importantly, even though you may not want to buy a home today, the pre-qualification is a great tool to have at your disposal. Often, realtors will request that a buyer receive a pre-qualification before they show you houses. Realtors don’t want to show homes that are unobtainable for their clients. Think of it as saving both their time and yours! Having a pre-qualification also strengthens your offer to a seller, showing that you are a serious buyer with financing to back it up.
Sounds like a good idea, how do I do it? Easy, just gather your information, and reach out to your lender. They can pre-qualify you online or over the phone in a matter of minutes, and there is no cost involved!
What information should I have ready? Here are a few of the items you can expect to potentially discuss and speak to for yourself (and any potential co-applicant) when getting pre-qualified with a loan officer.
- Photo ID
- Social Security Card
- Verification of current rent payment and dates of residence
- Name, address, and phone number of your employers for the last 2 years if applicable
- Proof of current income (most recent 2 months paystubs)
- Last 2 years of W-2 forms and last 2 years of tax returns
- Assets (checking and savings accounts, CD's, real estate, etc)
- Statements of existing loans and obligations (mortgages, student loans, personal loans, etc)