The pre-qualification letter is the first step in the home search process.  Typically, homebuyers start searching for homes online, visiting the neighborhood or contacting a local real estate agent.   When you begin the search to buy an home, whether primary, vacation or investment home, first step is to contact a loan officer.  You can find a loan officer at your local banking institution or by asking friends or family for a referral to a mortgage broker is helpful.   When searching for a loan officer, it is important to make sure that person is a qualified lender and licensed to conduct business.

The loan officer will ask you two important questions that will quickly determine the ability to secure a mortgage.

  1. What is your monthly income? This is the gross amount on all income sources in your household.
  2. What is your monthly debt. This is all expenses that includes item, current housing payments, student loans, credit card payments, car loans and any other significant payment of obligation.

The reason for this information is that the loan office can quickly make a determination about the possibility to qualify for a new mortgage.  With this information they will do a calculation to compute your debt to income ratio. The lower the ratio, the better pre-qualification.  After the first discussion about debt to income ration the loan officer may require additional information to issue a pre-qualification letter.