Get Pre-approved: The First Step toward Homeownership

This article is sponsored by PenFed Credit Union

Thinking about buying your first home? A home is a great asset that can help your overall financial picture, but it’s also a major investment. Knowing where to start can be a little overwhelming. A good first step is to get pre-approved for a mortgage. Getting pre-approved allows you to shop for a new home with confidence. It can help you narrow your home search to only those that fit your budget. And it demonstrates to sellers and Realtors® that you are serious about purchasing a home.

Do some research.

 Get an idea of the kind of loan you might want. Consider:

  • Conventional fixed-rate mortgage — if you plan to stay in this home for many years, a fixed loan can help you ensure stable payments for the entire time that you own your home.
  • Conventional adjustable rate mortgage — these mortgages often have lower interest rates for a certain period of time (usually 5 or 15 years). If you think you’ll be ready (and able) to sell or refinance your home before the period ends, an adjustable rate mortgage can help you afford more home for the same monthly payment.
  • VA fixed-rate mortgage — if you qualify, these mortgages offer excellent terms.

Your lender can also help you determine which loan is best for you.

Gather your paperwork.

Having your most up-to-date documents on hand will help the pre-approval process go smoothly and quickly. Some of the documents you might need are:

  • Pay stubs
  • W-2 information
  • Tax returns (particularly if you are self-employed)
  • Bank statements
  • Information on other assets (retirement or mutual funds, stocks, etc.)

How much should you spend?

  • A good rule of thumb is that your mortgage should cost no more than 33% of your total monthly income. However much you qualify for, make sure you feel confident that you can handle the payments before committing to them.
  • This affordability calculator can help you determine how much you should spend on a home based on your income and other factors.
  • The pre-approval will give you an accurate expectation of what the lender will be willing to lend. Then, you can ask your Realtor® to look for homes at or below that price.

For more information, visit the Home Center at PenFed.org, or call 800-970-7766.

PenFed is an equal housing lender.

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