Number two in a four-part series.
By Justin Walseth, Vice President – Mortgage Department Manager
First International Bank & Trust, Member FDIC
After setting your budget, and maybe even before you identify the home of your dreams, the next step for a first-time homebuyer is the pre-qualification process. Pre-qualification is a non-binding agreement from your lender that you can borrow up to a certain limit, and happens before the formal application process.
Getting the big picture
First, you’ll need to provide information that helps us understand your total financial picture. This includes:
- Personal identification for you and any co-owners, such as a spouse. Things like your full name, date of birth, social security number and previous addresses are standard.
- Credit score and history (we pull this for you). Credit score is important, but it is one of multiple factors in the pre-qualification process – so if your score isn’t great, don’t panic!
- Information about your income, debt and other assets.
Because every situation is unique, don’t be surprised or offended if we ask you for some additional information. And if you have any questions, you can always call us or visit our online mortgage resources.
Running the numbers
First International uses a robust electronic underwriting system that requires a minimal amount of information from you and allows us to determine your eligibility and interest rates almost immediately.
Your eligible interest rate is also based on a number of factors:
- Credit score
- Whether you are taking advantage of a housing program such as those offered through the Federal Housing Administration (FHA), Veterans Administration (VA) or the North Dakota Housing Finance Agency (NDHFA).
- Down payment. The higher the down payment, the lower the interest rate.
While your final interest rate will not be determined until after the complete application, verification and final underwriting process – and you have locked it in – this process provides a good benchmark.
A common misperception when it comes to interest rates is that the bigger banks can negotiate lower interest rates for their customers. This is simply not true!
What if I don’t get pre-qualified?
Unfortunately, there are circumstances where an individual gets turned down for a loan. As your lender, we use this opportunity to help you address the issue head-on. Whether you need to establish a credit score, eliminate debt or save more, we can talk to you about strategies that will help.
The goal of pre-qualification is to walk away with a non-binding pre-qualification letter stating that, barring any significant changes to your financial situation, you can indeed afford the home of your dreams. This letter can give you a leg-up on other homebuyers because it signals to the home owner that you have the means and are serious about buying. So congratulations! You’re one step closer to ditching the apartment.
Justin Walseth is a mortgage expert in Fargo with more than 10 years of mortgage lending experience. He graduated from MSUM with a degree in Finance and Economics. When he’s away from work he enjoys golf, basketball and tennis as well as spending time with his wife and two children.