Welcome to part two of my series detailing the CQPs of home buying: commitment, qualification, and process. Today’s video will focus on the qualification aspect.
What does it mean to be qualified? It means you’ve taken the steps to qualify to purchase your home. What are the steps to qualifying? When you start the home-buying process, you’ll talk to a loan officer who’ll tell you exactly what these steps are. Some basic things you’ll need include a credit report, bank statements, tax statements, and anything else that helps clarify where your money comes from. If you have, for example, gift funds, you need to be able to identify who gifted you that money and where it came from.
Let’s say, for instance, you have someone gifting you money who doesn’t want to go through the qualification process with you. The best way to prove that income is ensuring that money is in your bank account via at least two bank statements. That way, when your bank records are pulled, it doesn’t show that that money was freshly deposited. If you’re qualifying for a loan, you have to verify where all your money comes from, and banks look for new deposits and anything else that looks suspicious.
What if you think you’re not qualified? I recommend going through the process anyway because a rejection isn’t always definitive. When you try qualifying with a certain lender, they’ll run your credit, ask you some questions, and come back with one of three answers that sound something like this:
1. “Everything looks great! You’re qualified for X amount of money and you can start looking at homes today.”
2. “You’re close, but you have a little work to do. Let’s put together an action plan.”
3. “You know what? Let’s take a step back, take a deep breath, and figure out how to get you where you need to be.”
That last answer doesn’t mean you’re unqualified; it just means you have a bit of work to do. Remember, if buying a house was easy, everyone would do it. You’ll better yourself in the long run once you’re able to purchase your first property (or your second, third, etc.).
What if you’re worried you don’t have enough money? That’s where you’ll talk to your loan officer to find out where you need to be. You might be surprised to know that I’ve had clients who didn’t think they had enough money to buy a home, and they ended up purchasing very nice properties.
Lastly, understand that when you undergo the loan qualification process, the lender will go through your debt-to-income ratio. As long as you don’t have more going out each month than you have coming in, you should be OK. Again, if this is something you’re struggling with, we can talk about how to get you to where you need to be.
As always, if you have questions about today’s topic or there’s anything else I can help you with, don’t hesitate to reach out to me. I’d love to help you. Also, stay tuned for my next video where I’ll cover the last part of this series: process.