Prequalification Checklist for a Home Loan
Ready to buy your next home? As a prospective homebuyer — or as a real estate agent — you want to make sure you know what you need to qualify for a home loan. In order to prepare for this huge step, here is a home loan prequalification checklist.
What is prequalification, exactly?
First, it's important to note that prequalification can be a good first step in the home-buying process. If you're looking to get a mortgage, you'll want to get prequalified by a reputable lender first. This is an easy process, but it's important to remember it's not the same as being pre-approved for a mortgage. (Some lenders may use these terms interchangeably.) The process of prequalification takes a look at your numbers and gives you an idea of how much you may be approved for when applying for a mortgage. The result isn't set in stone, but it's a good starting point, and we're happy to help you get started.
In order to get prequalified for a home loan, here's what you will need:
- Income – A lender wants to know how much you can reasonably afford for a mortgage given your current income.
- Your W-2 forms and paychecks are a good resource to understand what your collective income is.
- Assets – On top of your income, a lender may want to know how your overall financial health is to determine if you can handle a responsibility like a mortgage.
- You will want to have an overall idea of your combined assets, savings, and real estate.
- Debts – A lender wants to know how much debt you have and look at your overall debt-to-income ratio in order to assess what you may be able to afford.
- Not sure what your debt-to-income ratio is? We’ve got you covered. This article explains everything you need to do.
- Credit – A peek into your credit history can offer a lender an idea of how responsible and creditworthy you are.
- Ensure that you are taking the steps in the right direction to build up a good FICO score.
The good news is that with this information, you may be able to be prequalified by a lender, and you can complete the process in-person or by phone.
Having a prequalification letter can show that you're really serious about buying a home and can open doors in the home-buying process and make the mortgage process much easier. It can save you time and a lot of hassle so that you know what you can actually afford.