Loan Surfer Home Buyer Guide

KNOW WHAT YOU CAN AFFORD

GET PREQUALIFIED Before you start looking at houses, work with your loan officer to get prequalified, which will let you know how much home you can afford. This can help you narrow your home search to houses within your budget, give you an idea of how much you’ll need for a down payment, and help you identify budgeting goals to work toward. To determine the loan amount you can qualify for, your lender will look at your income, debts, savings, and assets.

QUALIFYING FOR A LOAN What Lenders Look At: Lenders look at a variety of factors when determining if you qualify for a loan. The 4 Cs of Credit Character represents your credit history or financial integrity. Your credit score, how much credit you’ve used in the past, and whether you make your payments on time are examples of your financial integrity.

Capacity represents your ability to repay a loan. The amount of your income and assets are compared against your monthly debts to make sure you can afford a loan.

Collateral is the asset securing the loan — in other words, the value of the home itself. If you default on your payments, the home can be repossessed by the lender. Capital is how much money you’re able to invest in the collateral, represented by your down payment. The amount of capital you contribute shows that you have “skin in the game” and reduces the risk to the lender.

As a general rule of thumb, your monthly housing expense should not exceed 28% of your gross monthly income.

While getting pre-qualified can be a big advantage during your home search, it’s not a guarantee for a loan. Getting approved for a mortgage happens later in the process.

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