One of the first questions to answer when you are thinking about buying a house is whether you can afford it or not. The answer helps decide whether to rent or buy, what neighborhoods you can be looking at, and what type of stability you need in your job. The best way to answer these questions is by speaking with a lender.
You can get mortgages from banks, credit unions, or mortgage companies. Within those firms are literally hundreds of loan programs to choose from. The lender’s job is to work with you to determine the choices that are right for your expenses and income. Maybe you’re a veteran and can qualify for Cal-Vet or you are interested in an FHA loan. Your lender will be able to talk about your options and recommend programs that will work for you.
This process gives you some important answers.
First, can you qualify for a loan? You might have credit issues or work history that needs to be addressed. Just a few late payments can hurt your chances of getting a loan, so you need to find out if you have to work on repairing your credit.
Second, how much loan do you qualify for? It’s not unusual for people to meet me and talk about house budgets that end up being as much as $100,000 or more over what they can qualify for. I want to help everyone reading this to get a home if that’s what they want, but it’s important to start the process with a realistic view of a mortgage, property taxes, insurance and other expenses that impact your budget. The prequalification process is where that gets worked out.
Documents you might need for the pre-approval process
- Driver’s license or other ID
- Social Security numbers
- Date and place of birth
- Two year residence list (with addresses and phone numbers)
- Two year work history (with name of company, address, phone, salary and position)
- Account information, name of bank, account number and balances (checking, savings, 401k)
- Pay stubs covering 30 days
- W-2s for last two years
- Two months of recent bank statements
I often get asked where people should go to find a lender. I work with some excellent people repeatedly because they have worked hard to make transactions work. At the same time, I want you to have a comfortable working relationship with your lender. The home buying process can be complex and difficult at times. You want a lender who will work to make the process successful for you. I often recommend that people who don’t know a lender personally should talk to their local banker. The people that have your checking or savings accounts probably also do home mortgages. Most of them can be competitive with rates. You may end up with a different lender by the time you are ready to buy, but getting pre-qualified at your bank is a good first step.