How to Prequalify for a Home Mortgage Loan

Know what you can afford when you begin your new home search.

When you are shopping for a home, the search can be easier if you prequalify for your home mortgage before you begin searching with a real estate agent. Getting preapproved for a home mortgage loan lets you know ahead of time how much money you can spend on your new house. This can eliminate falling in love with a property only to discover you cannot afford the mortgage payments. Once you have your financial paperwork in order, lenders are more than willing to help you go through the prequalification process.

Things You'll Need

• Tax returns
• Income statements
• Credit report

Instructions

1. Gather your financial paperwork. Compile all of your bank statements, paystubs, tax returns and any other relevant income information. The bank will determine your debt-to-income ratio to calculate how much of a house payment you can afford.

2. Determine your down payment amount. A higher down payment can allow you to afford a more expensive home by lowering the total mortgage loan amount.

3. Check your credit report. You are allowed one free credit report per year from each of the three credit reporting agencies. Pull your report and be sure it is accurate. If there are errors in your credit report, contact the credit bureau to have them fixed. Your credit score can affect the terms of your loan. Most mortgage lenders consider a credit score over 700 as very good.

4. Make an appointment with a mortgage home lender, or fill out an application online. A bank lending officer will sit down with you to help you determine what you qualify for as well as how much you can afford. You also can prequalify for a home mortgage online, generally communicating with a loan officer via email. You may want to check with several lenders as well as online to find the best deal for your mortgage loan.

Tips & Warnings

• Be sure to talk to the mortgage lender about fees and points for the mortgage loan.

• Determine how much you can afford to pay each month in addition to what you qualify for in a mortgage loan. People often qualify for more than they can comfortably afford to pay each month. Do not overextend on your house payment.

References

• MGIC: Prequalify for a Mortgage
• Mortgage Match; How to Prequalify Yourself For a Loan; Laura Sherman