Home Loans and What
you Need to Know to Pre-Qualify For a Mortgage - Income to Debt Ratios
and Credit Reports
July 19th 2006
Buying a home can be very stressful, but there are some things you
should do before you start looking. Having a regular pay check makes it
easier to qualify, but you will still need to check your credit report
first. You may be surprised how many extra addresses and mistakes can
be on your credit record.
Credit reporting agencies will not remove anything until they have
evidence that what they have is inaccurate. Usually the credit report
will have a dispute form attached with it. If you see something that
does not belong, fill in the forms and send them back.
They will respond either yah or nay to your correction request. Even if
there is a legitimate issue on your credit report, try to dispute it
anyway. Sometimes creditors are slow to answer the dispute, and if they
donít within the allotted time, and you could save thousands in
interest. Do this before you get pre-qualified.
Many loan brokers and some real estate brokers can handle the
pre-qualification process. They will check your credit, determine your
income and likely ask how much you have towards the down payment.
After you are pre-qualified, then you can begin shopping for your
house. But remember that just because you are pre-qualified does not
mean you will get a loan for a specific house, even if you are qualified
for that dollar amount. You will likely need an appraisal, and the bank
will assess your down payment with the value the house.
Credit card debt will count against you and is a factor used to compute
your debt to income ratio. There are many free debt-to-income ratio
calculators on the internet. If your ratio is 37%-42% it is considered
ok, but you should try to improve either your income or your debt. If
you score 43%-49% you are not in good financial shape.
Banks are looking for people that are unlikely to default on the loan.
Large down payments make you a better risk. Good credit scores can
improve your interest rate. It is always a good idea to check your
credit reports and determine your debt to income ratio before you begin
a pre-qualification process.
Keywords and misspelling: prequalify
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