Prequalify for Your First Home

Congratulations on your decision to purchase your next home.  One of the first and most important steps in the home buying process is understanding what you willing and can afford.  In our competitive market, it is important for buyers to get pre-approved. 

There is a big difference between pre-qualification and pre-approval. Pre-qualification does not guarantee you a loan. It merely establishes how much you are capable of paying for a house.

To get loan pre-approval, a lender will inspect your credit and financial situation in detail. This process guarantees you a specific loan amount and determines your monthly payment amount.

If you are the type of buyer that would like to do a quick pre-qualification on your own, here is a guideline:

  1. Calculate your complete gross income. This includes all interest payments, bonuses, salaries, interest, tips, and dividends.
  2. Determine your total monthly debt. This includes time payments, car payments, alimony, insurance, child support, regular savings, and other loans that you are paying.
  3. After determining your total gross income and total monthly debts, you'll insert the appropriate percentages a lender would use. Percentages will vary between lenders, but a common percentage is 28/36. 28/36 means that you will need take you gross monthly income and multiply it by 28 percent. This gives lenders an estimate on how much you can spend on a monthly house payment. This estimate includes insurance and tax.
  4. After that, take your gross monthly income and multiply it by 36 percent. Other than your mortgage, this is an estimate on how much you can spend on paying off your debts.
  5. Subtract your real monthly debt from your maximum monthly debt. This amount more closely represents how much you can actually spend on house payments.

This amount is only an estimate. It can give you a good idea where you stand, but it isn't a definite amount. Once you get this figure, talk to one of our trusted lenders about your available options and your pre-approval.