If you are a home buyer planning on that first or next home in Chantilly, or the Northern Virginia area, you should know that one of your first steps is mortgage pre-qualification. Pre-qualification is a step in the loan approval process, and it helps you in several ways.
Here are a few simple things to make this process easier.
1 – Get Your Debts In Order
One of the main items during your pre-qualification meeting will be your credit history and debt payments.
The lender will look up your credit history to know how your income and current debt obligations look. Do everything you can to get any debt paid down. And by all means, do be totally transparent with your prospective lender. Any unmentioned or inaccurate information will come back to create problems for you.
2 – Chart Your Income And PITI
The lender uses a simple formula (PITI to income ratio) to determine your qualification amount.
To calculate your front end ratio, simply divide your gross monthly income by your monthly mortgage payment (your PITI amounts plus your mortgage insurance). Most lenders will want to see a PITI to income ratio that is under 28%.
3 – Build Up Your Savings Account
You may qualify for loans that do not require a full 20% down, but you will still need savings.
Closing costs are the fees associated with getting a mortgage loan. These can also be negotiated to be paid by the seller, but there is no guarantee on that.
Reserves are the amounts that will need to be collected to cover your taxes, insurance and mortgage insurance on the property. These will fund the “reserve” in your escrow account so you’ll always have enough to cover those expenses as they come due throughout the year. Your mortgage company keeps this money for you and pays the expenses on time as well.
4 – Make a decision on a real estate agent
Many buyers avoid working with an agent until they have started looking for houses and find something they like. They understandably want to avoid traditional “selling” behavior. But if you do take care to select someone who is really top notch and whose personality you find great to work with, you will get the benefit of using that person’s expertise to help you avoid pitfalls and potentially bad mistakes in the buying process.
Take a few minutes to check out our video on how to make a good, objective decision on selecting an agent, and if we can assist you in any other way please be in touch!