First-Time Homebuyer Pre-Approval Process

When you’re ready to buy, we’ll help bring you home.

Buying a home for the first time is an exciting prospect, but the process can seem like a long road from shopping for a home to getting the keys. Before you get ahead of yourself, the first step is to get pre-approved. Once you have a pre-approval document, it will make the rest of the process flow more smoothly.

A pre-approval provides an estimate of how much a lender will give you to borrow and how much you can afford. This is an important first step since having the pre-approval in hand can help you determine how much you can afford when you’re shopping for your new home.

Here is the process lenders will go through to get you pre-approved.

Step 1

Check your income

Getting pre-approved for a mortgage is a great step toward purchasing a home and can make first time home buyers much more attractive to sellers. Let Freedom Mortgage help you understand the benefits of pre-approval and whether you qualify today!

Having a job with a steady source of income is key. Lenders want to insure your income supports your ability to repay your mortgage. They will check your employment history, your salary and would want to see job stability--at least two years with the same employer. You will need to supply your pay stubs and two years of tax returns for income verification.

 

Step 2

Look at debt

Getting pre-approved for a mortgage is a great step toward purchasing a home and can make first time home buyers much more attractive to sellers. Let Freedom Mortgage help you understand the benefits of pre-approval and whether you qualify today!

Besides your earnings, a lender will need to know how much money you owe and if you pay your bills on time each month with little or no late payments. These include credit card debt, car or college loans, medical bills, etc. This is called a debt-to-income ratio (DTI) and it ensures that all these bills do not exceed a certain percent of your gross monthly income. According to the Consumer Financial Protection Bureau, this is traditionally around 43%.

 

Step 3

Pull your credit report

Getting pre-approved for a mortgage is a great step toward purchasing a home and can make first time home buyers much more attractive to sellers. Let Freedom Mortgage help you understand the benefits of pre-approval and whether you qualify today!

Besides looking at earnings and debt, lenders will pull your credit report to see your credit history. This will show if payments were made on time and if you had credit issues in the past, such as a bankruptcy. It’s a good idea to check your credit before you start the home buying process to ensure accuracy of the information on the report and that it is error-free. It’s best to contact all three credit reporting agencies—Experian, Equifax and TransUnion to pull your report as there could be differences between the three agencies. Get a free annual credit report through www.annualcreditreport.com.

Step 4

Review your assets

Besides having a job and good credit, you also need to have some money in the bank. Granted, first time home buyers typically don’t have a large nest egg and that is the benefit of some of the special finance programs like FHA or USDA loans in that they do not require large down payments. However, some cash on hand is necessary not only for the down payment, but for moving costs, buying furniture, unexpected repairs, etc.

Besides having a job and good credit, you also need to have some money in the bank. Granted, first time home buyers typically don’t have a large nest egg and that is the benefit of some of the special finance programs like FHA or USDA loans in that they do not require large down payments. However, some cash on hand is necessary not only for the down payment, but for moving costs, buying furniture, unexpected repairs, etc. A lender will ask for recent supporting documents such as statements from stocks and bonds, IRAs, bank accounts and any other assets to get a complete financial picture. Once you are pre-approved, you’ll be confident to start looking for a home within your budget. Your home search will be more targeted and realtors will know that you’re serious about buying a home and taking this exciting step.