Why Pre-qualify?

Being pre-qualified indicates that a loan officer has collected some information about your debt, income, and assets. The loan officer then will look at your credit profile and your goals for down payment etc. to get an idea of several different loan programs which will work for you as an individual.

First, a loan officer pre-qualifies you, next, complete the full loan application to be pre-approved, and then when you find the property, your pre-approval becomes a complete application.

When determining your ability to qualify for a mortgage, a lender looks at what is called your "debt-to-income" ratio. A debt-to-income ratio is the percentage of your gross monthly income (before taxes) that you spend on debt. This will include your monthly housing costs, including principal, interest, taxes, insurance, and homeowner’s association fees, if any. It will also include your monthly consumer debt, including credit cards, student loans, installment debt.

Here's a link to our debt to income calculator

FICO scores are your credit rating. Most lenders base approval on them. You have three FICO scores, one for each credit bureau, and you can only get all three from myfico.com.

Beware of sites that advertise free credit reports and charge consumers for fees. Read more in an article by Stephanie Clifford called "The High Cost of a Free Credit Report".

The Federal Reserve Board  has consumer information including tips for improving credit scores, a guide to mortgages and personal finances information and tools.

The Federal Trade Commission offers a report to inform consumers on how to build better credit.

Tips for shopping a Mortgage

• Know your credit score beforehand: Your credit rating will determine whether you will be offered a loan and what you will pay for the loan.
  
  
• Have an idea of what your needs are. How much will you need to borrow? How much can you afford to pay each month and still allow enough money for your other living expenses?
  
  
• Once you know what your credit history is and what you can afford to borrow, shop around. Get loan quotes from at least three different sources. Create a worksheet to compare the interest rate, points and fees from one lender to another.
  
  
• Never give false information or allow a loan officer to submit false information in an application on your behalf.
  
  
• Read all the information on the application before signing it. Your signature means you agree with the application. Take the time to know if the information is accurate.
  
  
• You may also check the complaint history with your local Better Business Bureau.
  
  
• Fees, interest rates, and points are negotiable. Before paying any fees know if they are refundable. For example, any lender can waive an application fee or make a fee refundable under certain conditions.
  
  
• You may have the right to cancel the loan within three days. Make sure to ask the lender to provide you with a "Notice of Rescission," also known as a "Notice of Right to Cancel".

        Hud buying booklet.pdf
       To view and print Adobe PDF files you'll need Adobe Reader.  Free Adobe Reader®