- About Us
Home Buyers & Renters
- Home Buyers & Renters
- Property Managers
- Donors & Investors
- Non-Profits & Governments
- News & More
- Contact Us
Home buyers should contact a lender for a loan pre-approval before they start looking for a home so they know how much they can afford to spend. A loan pre-approval can also demonstrate to a seller you are serious about buying a home. Be sure to shop around for a reputable lender and a loan product with rates and terms that work best for you.
Lenders analyze the following factors to determine if you are credit-worthy and if so, how much you can afford to spend:
This is the amount of cash you have available. The more cash you have in savings accounts or other places, the more comfortable a lender is that you can afford homeownership.
You will need to show that you have enough capital to pay for the following:
This is your ability to earn enough income to make your mortgage payments and still pay all of your other living expenses. Lenders look at several things to determine capacity including your current income, your income history, your earning potential, and your debts.
Lenders will also calculate your debt-to-income ratio (DTI), also known as the back-end ratio, to determine how much of your gross monthly income is needed to cover all your debt obligations. Follow these steps to determine your approximate DTI:
To check your credit history, the lender will order a copy of your credit report and credit score from the three major credit bureaus: Experian, TransUnion, and Equifax. This is how the lender determines how you have handled other debts and how likely you are to repay your home loan.
It is a great idea to review your credit report before you purchase a home.
Review all information to make sure there are no errors. Housing Counselors working for a non-profit, government entity, or community based organization can also provide you a copy of your credit report as well as guidance when reading through it. Find a counselor near you.
What is a Credit Score?
The credit score is a number grade attached to your credit report. Creditors consider your score when deciding whether to approve your application for a loan or credit card as well as how much credit to extend and at what interest rate. The higher your score, the better. Scores range from 300-850.
What Determines Your Credit Score?
No Credit or Bad Credit? Beware of “Quick Credit Fixes”. Most of the companies that make these claims charge you money for things you can do on your own. Nonprofit financial counselors are available to help you for little to no cost. Find a counselor near you.
Your new home will be collateral for your loan. The lender will order an appraisal of the home to ensure it is worth as much money as you are borrowing.