Buying a home is a big financial decision. It also comes with a lot of new terms, numbers and questions.
The good news is you don’t need to have every answer figured out before you start.
A conversation with a lender can help you understand what your budget may look like, which loan options could be available to you and what you may want to work on before you begin seriously shopping for a home.
Here’s what to know.
Before comparing floor plans and deciding which kitchen you love, it helps to know what feels comfortable financially.
A mortgage lender can help you estimate:
That conversation is about more than finding the maximum amount you could qualify for. It’s also a chance to talk through the monthly payment you’re comfortable carrying alongside everything else in your budget.
MonteVista Homes works with Mutual of Omaha Mortgage as our preferred lender, and buyers are welcome to begin there or choose another lender that fits their needs.
Explore Mutual of Omaha Mortgage’s homebuying resources
A pre-approval gives you a clearer picture of your potential buying power before you choose a home.
Your lender reviews your financial information and, based on that review, may provide a pre-approval letter with an estimated amount they are tentatively willing to lend. It isn’t final loan approval, and it doesn’t guarantee financing. Final approval comes later after the lender reviews the property and completes underwriting.
The Consumer Financial Protection Bureau notes that pre-approval letters can also expire, which is one reason buyers often get pre-approved when they are getting serious about their home search.
Learn more about mortgage pre-approval from the CFPB
There isn’t one number that determines whether someone qualifies for a mortgage. Lenders look at the bigger financial picture.
Income and Employment
Your lender will want to understand where your income comes from and whether it can be documented.
For many conventional loans, underwriting guidelines look at the borrower’s recent employment history to establish a reliable pattern of income. A shorter history does not automatically prevent someone from qualifying, particularly when there are other positive factors.
That can be especially helpful to know if you recently changed jobs or haven’t spent two years with the same employer.
Credit
Your lender will also review your credit history and how you have managed debt over time.
There isn’t a single credit score that guarantees approval or a universal minimum that applies to every mortgage. Requirements vary by lender and loan program. FHA-insured mortgages, conventional loans, VA loans and other programs can each have different requirements.
The important thing is not to assume you need “perfect” credit before talking with someone.
Monthly Debt
Car payments, credit cards, student loans, personal loans and other recurring obligations may factor into the amount you can qualify to borrow.
Your lender can explain how your existing monthly obligations affect your overall buying power.
Money for the Purchase
You may not need a 20% down payment.
Depending on your situation, loan programs may offer lower down payment requirements, and some buyers may qualify for down payment or closing cost assistance.
For Oregon buyers, Oregon Housing and Community Services currently offers homeownership programs and resources that may help eligible buyers with down payment and closing costs. Eligibility varies by program.
Explore Oregon homebuyer assistance programs
You don’t need to show up to your first lender conversation with a perfectly organized binder.
Still, having a few things handy can make the next steps easier.
A lender may ask for:
Self-employed buyers may be asked for additional documentation such as tax returns, business income records or profit-and-loss statements.
The exact list depends on your income, loan program and individual situation.
CFPB offers a helpful mortgage application checklist if you want to start gathering documents ahead of time.
See the CFPB mortgage application checklist
Your finances will be reviewed again before your loan closes.
That makes the period between pre-approval and closing a particularly bad time to finance a new car, open several credit cards or make a large purchase on credit.
CFPB recommends avoiding new loans and credit accounts in the months leading up to a home purchase because they can affect your credit and borrowing profile.
When something changes, call your lender before assuming it won’t matter.
That includes a job change, large money transfer, major purchase or new debt.
Don’t be afraid to ask very practical questions.
And one of the best questions of all is simply, “Is there anything I should avoid doing between now and closing?”
A good lender should be able to explain the answers without making you feel like you need a finance degree to follow along.
It’s easy to put off talking with a lender because you think you need more savings, better credit or every detail figured out first.
You may be more prepared than you think.
And if buying isn’t the right move quite yet, that first conversation can still give you something valuable: a clearer idea of what to work toward.
Once you understand the numbers, the fun part gets a whole lot easier.
Then you can start exploring communities, floor plans and homes knowing what makes sense for you.
Explore MonteVista Homes communities and available homes
Connect with Mutual of Omaha Mortgage to learn more about your financing options and mortgage pre-approval.
Get Pre-Approved with our Preferred Lender
Disclaimer
MonteVista Homes is not a mortgage lender. Loan programs, credit requirements, down payment assistance, rates, terms and eligibility requirements vary by lender and may change. Pre-approval is not a commitment to lend and remains subject to verification, underwriting, property approval and the buyer’s financial circumstances.
