Your First Time Pre-Approval Checklist
Posted by : Admin
While buying a home is an exciting time, it’s also important to be prepared for the financial responsibility that lies ahead with a mortgage.
These loans often extend repayment periods (oftentimes up to 30 years) and a lower interest rate since the home and property are collateral for the loan. However, there are some requirements for these loans in order to get pre-approved for them.
Income
A mortgage lender requires documentation before pre-approval of a mortgage begins. This can be difficult for first-time home buyers who have to prove a steady income to qualify. This is especially true of borrowers that perhaps are just starting their careers or have existing debt such as student loans. However, steady and regular monthly income is required for most mortgage companies to give a pre-approval.
Existing Debt/Credit Score
A loan officer will determine the amount of monthly debt in comparison to someone’s income (known as the debt-to-income ratio). Even If the borrower has little or even no existing debt payments, their past history of credit is a major factor in considering whether they will be pre-approved for a mortgage with a mortgage lender.
Down Payments
A mortgage company typically requires a down payment of 10 to 20 percent of a loan to be pre-approved (or even approved in general).
Ultimately, while these things may seem overwhelming to first-time home buyers, the government does have many federal tax breaks for homeowners such as mortgage interest deductions as well as real estate and first-time home buyer tax breaks. All of these things can help to lower someone’s tax obligations at the end of the year resulting in a significant tax refund.
