One of the first steps to take as a potential home buyer is to get pre-qualified for a home loan. This step helps both you and your lender learn just how much home you can afford. And you should begin this process before you even start looking for a home.

According to the Federal Housing Administration (FHA), their pre-qualification essentials include:

• Having a steady employment history, covering at least two years.
• Consistent or increasing income over the past two years.
• Credit report reflecting a good repayment history with creditors.
• Any bankruptcy must have been discharged at least two years prior (one year for a Chapter 13), with good credit since the discharge.
• Any foreclosure must have been completed at least three years prior, with good credit since the completion of the foreclosure.
• Mortgage payment – including taxes, homeowners insurance, mortgage insurance, and HOA dues (if applicable) should be no more than approximately 30% of your total gross monthly income.
• Total monthly debt payments should not exceed approximately 45% of total gross income.

To determine pre-qualification, mortgage lenders will look at your credit report, earnings, debts, and savings in order to see how much home you really can afford.

Why is pre-qualification important?

Pre-qualification for a home loan typically costs you nothing, but gives you a goal of what homes are in your affordability range, as well as how much money you should look to have saved for a downpayment.

During the pre-qualification process, you will be expected to provide the following information:

• Your gross monthly income
• Your total monthly payments (car payments, credit cards minimums, child support payments, student loan payments, any other monthly debts)

Ready to find out where you stand? Talk to a Guild Mortgage Loan Officer today and get one step closer to your home ownership goals.