Preparing Yourself When Buying Your First House

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First-time homebuyers might find it fun and exciting to shop for their first homes, but a serious one knows to start the process by talking to a lender, not in open houses. Most sellers expect buyers to bring their pre-approval letters during the open house and are more than eager to discuss with those who can prove they can obtain the financing for the property. That makes pre-approval an important part of the process.

You’ll have to present documents to prove your employment verification, good credit, income and assets, and other paperwork needed to get pre-approved for the mortgage.

Here’s a guide that you can refer to before applying for your first home mortgage loan.

What’s a Mortgage Loan?

Mortgage loans refer to the financing options you can use for maintaining or buying a piece of land, home, or other kinds of real estate. In the contract, you agree to pay your lenders, usually in a series of regular payments divided into interest and principal. Your property works as collateral to secure the loan. You can apply for the loan through your preferred lender and comply with their requirements.

Each lender has its requirements, but the most common ones are down payments and minimum credit scores. Your application also goes through a strict underwriting phase before it gets approved or the deal gets closed. Mortgage types also depend on your needs, including fixed-rate or conventional loans.

How to Qualify for a Loan

Before submitting your loan applications, it’s best to familiarize yourself with the things you’ll have to comply with to get pre-approved. That can include the property type, debt, assets, credit profile, and income. Let’s discuss each factor closely.


One of the first factors that a lender will check to evaluate your loan application is your household income. Having a minimum income isn’t needed; however, your lender will check if you have enough finances for settling mortgage payments and other bills. You should also remember that lenders will not include your salary in calculating your total income. Most lenders will also check other reliable sources of income, like:

  • Social Security payments
  • Investment accounts
  • Overtime
  • Commissions
  • Child support payments or alimony
  • Extra income from a second job
  • Military allowances and benefits

Lenders will also check if you’re getting a regular income. Usually, they will not approve the stream of income that doesn’t continue for at least two more years. For instance, if your allowances and benefits are only for a few months, they will not consider that.


Most lenders will also check if you can continue paying your premiums if you face financial emergencies. That’s when your assets come in. Your assets refer to valuable belongings that you own, including:

  • Retirement and investment accounts
  • Mutual funds, bonds, and stocks
  • Certificates of deposits
  • Savings and checking accounts

Your lenders will also ask for documents to prove these kinds of assets.

Debt-To-Income Ratio

Lenders will also check if you have sufficient finances for settling the bills. Your income will not help determine this so that lenders will evaluate your debt-to-income ratio. Your DTI refers to a percentage that tells them what portion of your gross monthly income goes to selling your monthly bills. In calculating your DTI, you can start by adding the monthly fixed payments. Only include the recurring expenses in your calculations.

That can be your student loan payments, credit card minimums, or rent. Then, divide the total of your monthly expenses by your pre-tax household income. Don’t also forget to include your sources of reliable income. Lastly, multiply that number by 100.

Your record will be attractive to lenders if your DTI is lower. One tip to remember is that your DTI shouldn’t exceed 50% to apply for a home loan.

Credit Profile

Your credit profile refers to a numerical rating that tells a lender how reliable you are as a borrower. Having a high score means knowing your spending habits, not applying for too many loans, and settling your dues on time. Having a low credit score might mean that you’re always late on your payments.

It’ll also indicate that you’re applying for debts that you can’t settle on time. Borrowers with a decent credit score will have the lowest interest rates, and you can pick from the largest selections of loan types.

Property Type

The kind of property you’re planning to buy will also affect the process of applying for a home loan. Your primary residence is the easiest kind of property you can get. Lenders have always considered primary residences less risky, and that allows them to provide for more people. That will also enable them to extend loans to more buyers. For instance, you lost your income, stopping you from facing an emergency.

If this happens, your instincts will tell you to prioritize your mortgage payments. Other kinds of government-supported loan options are only for primary residence purchases.

If you want to buy an investment or secondary property, you might have to comply with a stricter debt standard, down payment, and credit score. That’s because these kinds of properties are riskier for lenders.

In buying your house, you should first secure your pre-approval letters. Listing your priorities down will help determine the other requirements you might have to meet during the application process.

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