Steps To Get Pre Approved For a Home Loan

Buying a home is generally considered to be a milestone in a person’s life. It says that a person is ready to settle down in one place for many years to come, and it can also signal that a person is ready to start a family. However, there are many steps that a person needs to take to get approved for a mortgage.

Get Your Financial Paperwork Together

To get the best loan terms, a person will need a debt-to-income ratio of less than 43 percent on a conventional loan. The DTI limit for an FHA or USDA loan may be closer to 50 percent depending on a borrower’s overall profile. It will also be necessary to provide tax returns for the previous two years, and those who are self-employed may be asked for additional information about their income. Any source of funds that are received on a regular basis may be considered income on a mortgage application.

Acquire Funds to Pay Closing Costs

For a traditional loan, a borrower will need to put 20 percent of a home’s purchase price down at closing. Document fees, property taxes and other fees may also be due at the time of closing. As part of the application process, a lender may want to see that a borrower has money in the bank and that it came from an approved source. Those who are using government loans to buy a home may be gifted money for a down payment or closing costs. (Read more on buying tips in a sellers market here.)

Start Loan Shopping Early

Talking to a preferred lender in a timely manner may make it easier to get pre-approved or pre-qualified for a loan. A loan officer in Las Vegas will collect a borrower’s information and estimate how much he or she may be eligible to borrow in a matter of minutes.