One of the most important and time saving steps during your quest to find a home is prequalification for your mortgage. By doing this, you have an idea of what you can afford and can narrow the search for a home and you will have already completed some of the steps necessary to close on a home. Normally, lenders don't charge prequalification and the process is somewhat similar to the actual loan application process itself.

What will you need to get prequalified? A good list of items includes:

• Credit report
• W-2 forms
• Tax returns
• Bank statements
• Recent pay stubs

What is next? There are some steps to prequalification. These include: 

Step 1

It is a smart move to go online to use a mortgage prequalification calculator before talking to a lender. This way you can get some idea of what you can afford. You can plug variable things such as the percentage rate and loan terms.

Step 2

You need to calculate your debt-to-income ratio. What is this exactly? It is how much money you owe for housing costs, credit cards, car payments and other debts in relation to your gross income before taxes are taken out.  Typical lending institutions don't want that number above 36 percent.

Step 3

Get a credit report! You can order a report from each of the three major credit-reporting bureaus and then these reports need to be checked for any incorrect information. Make sure that you have plenty of time to dispute any inaccuracies listed on your report or to correct any credit problems.

Step 4

Get prequalified with more than one lender. You are under no obligation to borrow from a specific lender, you will want to compare rates in order to find yourself the best deal. You might want to start with the bank or credit union where you do your normal banking. If you aren't offered the interest rate you want, it pays to shop around.

Step 5

Gather together the financial documents you will need when you approach a lender to request a prequalification letter.  Using the list mentioned previously, make sure you have several months' worth of those documents.

The final step is to fill out the prequalification application completely and accurately. At this point, the lender may or may not verify the information you provide. Usually, you will know if you prequalify within a few minutes. Many lenders will even prequalify you on the telephone. The lender will then provide you with a prequalification letter stating that you have been prequalified for a home loan in the amount indicated on the letter.

Remember, prequalification does not commit you to a certain lender and it does not guarantee that you will get the mortgage loan you want. If a lender wants, they can do more research on your credit history and can turn you down for a home loan. Bottom line is do your homework and be organized. It will pay off with that new home!

Old Colony, REALTORS® is the region's largest independently owned real estate company.  Serving the Kanawha Valley, Raleigh County and southern West Virginia, Morgantown and North Central West Virginia, Cabell and Wayne Counties, Ashland and Southeastern Ohio.  Old Colony was founded in 1944 in Charleston, West Virginia.