Getting Pre-approved :
The first step to buying a house

Getting pre-approved is a crucial initial step when considering the purchase of a home. This process involves contacting your lender to determine your buying capacity based on your income, anticipated down payment, other expenses, and credit score. Being pre-qualified not only helps you understand the price range you should consider but also signals to sellers that you are a serious buyer. Here's a breakdown of what you typically need to qualify for a conventional loan:

1. Down Payment: Ideally, your down payment should be 20%. For example, if the house you are looking for is $300,000, you should have $60,000 as a down payment. Putting less than 20% down requires a monthly insurance fee known as PMI, which can be removed when you have enough equity in your house.
2. Debt: The less debt you have, the better. The lender will calculate your backend debt to income ratio (DTI), which ideally should be no higher than 36%.
3. Credit Score: Ideally 740 or above. A higher credit score qualifies you for the best interest rates on your mortgage.
4. Employment History: Ideally, you should have been employed for the last two years, with lenders asking for your last two years' tax returns to determine your income.
5. Number of Applicants: You can apply with someone else to use both incomes, but keep in mind the lender will use the credit score of the lower applicant.