The very first step of the Home Buying Process is to Get Pre-Approved.
What is a Pre-Approval Letter?
A Pre-Approval Letter serves 2 Purposes.
First, the Pre-Approval will let you know how much house you can afford, in terms of Purchase Price and Annual Taxes. This will also be broken down into a Monthly Mortgage Payment based on a Purchase Price and Annual Taxes.
Second, the Pre-Approval is a commitment based upon the information you’ve provided (see below), that the Bank will grant you a Mortgage Loan up to a specified amount.
In order for the bank to determine how much you are pre-approved for, your Loan Officer will request and review the items listed below. Keep in mind that this list is a guide, you may be asked to provide additional information as well.
- Your Gross Income
- Your Debt to Income (DTI) Ratio
- Credit Score
- Assets on Hand for a Down Payment and Closing Costs
- Tax Returns
- Proof of Employment, if applicable
Lenders will be able to supply details about many types of mortgages, such as Conventional, FHA, VA loans and more! There are many types of mortgages and financial tools available that provide flexibility in interest rates, terms, and down payment requirements.
Questions to Ask A Loan Officers
What type of loan do you Recommend for Me, Why?
There’s not one type of mortgage loan that’s superior to another but whichever you choose, you need to know why it’s best for you and how it works.
Will my down payment vary based on the loan I choose?
If you’re tight on cash or don’t want to use all your cash towards your down payment, let your lender know! Loans vary in their down payment requirements.
Can I lock-in an interest rate?
If so, for how long? If you think rates will be increasing or decreasing, ask your Loan Officer what they’re Rate Lock Procedure is.
What will my Closing Costs be?
It will be hard for your Loan Officer to give you an exact amount but instead ask for a rough estimate. Remember, closing costs usually run 3-6% of your loan value and need to be paid at Closing.