Choose a lender who is willing to explain the pre-approval, approval and closing processes clearly. Be sure that your lender explains all fees, up-front costs, taxes, insurance and other costs of owning a home.
Generally you must establish a few things in order to qualify for a mortgage loan; for example, adequate income to support the continuing loan obligations and credit worthiness to demonstrate persistence in meeting credit obligations.
The lender will consider your income to determine the amount of loan. Lenders look at your debt to income ratio to determine the amount of loan you will qualify for. In other words, the balances on your credit and other loans will reduce the amount of the mortgage loan you will qualify for. Your credit score determines the amount of interest and type of loan you can qualify for.
The down payment is equally important. This is the amount of money you have to reduce the amount you need to borrow or increase the value of the house you can purchase. Some of your down payment can be applied to your loan to decrease your loan interest; this is called buying down points.
Before you begin the process of finding your home or investment it is a good idea to understand what you are able to afford and how much you feel comfortable spending. Consult with your lender, CPA or personal source who will help you determine your ability to pay for your purchase whether all cash or if a lender will be involved. It has become customary prior to starting your search that your Broker or agent will check and work with you to secure your ability for your purchase of real estate. With any offer the Seller will want to see a pre-approval letter if a lender is involved. This letter tells the seller and their agent how much of a loan you qualify for, excluding the amount you have available for a down payment or have to bring to the closing table. This is based on your income, expenses, and credit, a lender will provide you with a pre-approval letter for the loan amount and type of loan that they are willing to lend to you based on those factors.