Mortgage Approval Information

Most buyers aren’t familiar with how prequalifying for a mortgage works.  They know they need good credit, some form of down payment and a job, but what are Lenders really checking to ensure they can secure a mortgage?  When prequalifying your credit is pulled to check your credit score, but also see how much monthly debt you already have.  A Lender will then look at the amount of money that’s been saved and is available to go towards the down payment.  Prequalifying means you don’t have a particular property in mind so Lenders use a rough estimate like 5, 10 or 20% down depending on what the buyer has available based on home prices where the buyer is looking to buy.  The prequalifying loan amount is a rough estimate that is used to figure out an estimated monthly payment to include with the buyers current debts taken from the credit report.  The buyer’s income is then used to offset this proposed monthly debt to figure out the buyer’s debt to income ratio.  The buyer’s debt to income ratio, credit score and down payment play the biggest role when prequalifying.

Prequalifying is a vital part of the home buying process and should be addressed as early as possible once the decision to purchase a new home and secure a mortgage is made.  Many buyers don’t address the prequalification step until they’ve found a property or are very close to making an offer.  Your financial situation isn’t going to change from the time you start looking, until the time you look to make an offer, so there is no reason to delay prequalifying.