Homebuying Adventures: The Pre-Q.

Prequalification for a mortgage. Necessary first step regardless of whether or not you ever use said mortgage, and nothing could be more important if you’re setting out to buy a home…of any sort.

Well, that’s the threshold that I’m about to cross, having sent off my materials for the prequalification stage of things. And I’m a little terrified, and a whole lot of anxious, because this makes the entire process very, very, very real. Yeah… I’m staring right down the barrel of homeownership and it’s more than a little scary. There’s a¬†lot of financial outlay on the line here, and a mortgage ties you up for 30 years minimum. More or less depending on your finances and refi situations.

So, what goes into a prequalification packet? I can tell you this from both sides, having put together the documents for some of my first job’s tax clients, and now having to do so myself as a potential buyer. To prequalify for a mortgage, you need:

1. Tax returns

2. Paystubs or W-2s and a constant, consistent history of employment

3. ID

4. Bank statements

5. Credit score.

Yes, it’s personal as hell, but think about what a potential lender wants to know. The lender wands to know your spending habits – bank statement – which will tell them just how good you are with the money you earn, how far it goes, etc. W-2s – are you employed? Are you making the income that will back this mortgage? Tax returns: are you paying taxes and are you on time with them? In other words, they want to assess you as a risk factor. What sort of a risk is the lender taking with their money, shelling it for you to have the house, and will they get to see that money returned?

Now I do worry for my own prequalification result. Why? The student loans. The credit cards I’m not worried about; I am diligently working on those and, for once, have my spending under control (and that, trust me, is an accomplishment). But the student loans are a very major impediment; I have one loan with a steady payoff target looming close in sights, but there’s another sitting in deferment. But – if I have one loan to worry about rather than two, then I don’t foresee an issue in my budget in pulling a mortgage as well.

The problem is, of course, will a lender see it that way?

Fortunately, I have a mortgage broker whom I’m working with, and he is fantastic in answering the questions that I have.

The one thing I cannot tell you folks enough, especially if you’re my age and only now climbing out from under the loan quagmire is this: until you ask you will never actually know. Do I know if I can pull a mortgage within a couple years on my own? No. I don’t. I think I might, but I am an accountant, not a mortgage broker. I can stretch a small budget to where Nadia Comaneci would be impressed, but would a lender see it that way? I do not know. But what a mortgage broker can also do is put together a plan.

That counts for a lot.

Find a mortgage guy, folks. Even if you’re not buying a house right this minute, if you at least put enough together to get an idea for how much you qualify for, that’s one big piece f the jigsaw puzzle in place right there. Down payments, interest percentages – that’s all a whole other gamble. But first, find out what your financial picture looks like from the mortgage perspective.

I await my own results with trepidation, I must confess, but it will go a long way in me getting my own place.

K.G.

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