Buying a home can seem like a daunting process. Before you can even start shopping for your perfect castle, your finances need to be lined up so that you can be ready to make an offer when you find ‘the one’. But the process doesn’t have to be confusing or intimidating! We’re here to walk you through it! I recently got the chance to talk with Andrew Hooey, a mortgage loan officer out of Houston, Texas. We discussed the first step in the home buying process!
Andrew, thank you so much for joining us! I think where I’d like to start is at the beginning, and talk about the first step in the home buying process. Where does somebody need to start if they’re looking to buy a home?
Number one, the first step someone needs to take when purchasing a home is to get pre-approved. The reason pre-approval is the first step, and most important step, is because it allows the buyer, the realtor, the lender, and everyone involved in the process to understand how much of a house you’re qualified to purchase. So when a realtor is taking a client to search for houses, they’re not wasting their time. They’re able to aim at a specific price range because they understand how much that buyer is able to get a loan for. So that’s the very first step – to get a pre-approval.
Excellent! Could you tell us a little bit more about the details of pre-approval?
You get a pre-approval from your local lender. The way that works is they gain basic information from you like your income, what kind of job you do, your monthly debts, your credit score, etc. They aggregate this information and come up with a debt-to-income ratio, also known as a DTI. The equation for a DTI is your income / total monthly debt.
How does someone’s DTI influence their ability to qualify for a loan?
Different loan programs have different criteria that borrowers need to meet to qualify for any specific program based on their DTI. So a local lender is running a clients DTI, along with other details about their income and lifestyle, through multiple different loan programs in an effort to get the client qualified. This is how the local lender can match a potential homebuyer with the best loan program for their situation.
Make sure you stay tuned for the next installment of our home buying series! We will be sharing more from the interview with Andrew in the weeks to come. Are you trying to decide whether to build a new custom home or buy an existing home? This blog post may help you out!