Mortgage Basics

Mortgage lingo can be confusing. One of the first distinctions between terms that you need to know is the difference between prequalification and preapproval for a loan. The difference is significant.

The mortgage loan process is both straightforward and unique and specific to each individual based on their finances. The challenge most people face is gathering the information and documents needed. The mortgage broker and loan processor will let you know when additional information needs to be provided or updated throughout the process.

Your debt-to-income ratio (DTI) compares your monthly debt payments to your monthly gross (pre-tax) income. It’s the percentage of your income that goes toward paying off debt each month.

It’s easy to dream when thinking about buying a home. You may have already started looking at houses. Before you get your heart set on a neighborhood or home, it’s smart to take the time to determine just “how much home” you can afford.

Being prepared for the loan application process, which includes the preapproval process, is the best way to speed it along. Having the documents you need on hand will help. Mortgage lenders need this information to verify your finances for preapproval and later for the file they will send to the loan underwriter.

Your credit score represents your credit history. It’s a three-digit number ranging from 300-850 that indicates your creditworthiness and how well you pay back your debts. The higher your score the better.