About The Homebuying Process » Step 1: Why Get Pre-qualified? » Step 6: Application Prep Kit » Step 2: Housing and Debt Ratio Worksheet » Step 7: Start Shopping! » Step 3: Consider the Up-Front Costs » Step 8: The Closing Process » Step 4: Comparing Rates and Costs » Glossary of Terms » Step 5: Choosing a Mortgage

Why Get Pre-Qualified?

Getting pre-qualified for a mortgage loan shows you where you stand financially. A pre-qualification is based upon your current income, debt, and savings. Pre-qualifying is used to estimate the monthly house payment that you can afford—it does not guarantee you a loan.

After you learn more about the pre-qualification process, complete our online Pre-qualification tool. It's easy, fast and safe.

The Advantages of Pre-qualifying

• Tells you approximately the price of the home you can afford
• Tells you how much money you will need for the downpayment and closing costs
• Helps define your budgeting goals

PITI

PITI is a term used in the lending industry that refers to the four components of the monthly mortgage payment:

• Principal: The portion of the payment that is used to reduce the loan balance.
• Interest: The portion of the payment used to pay interest that is due.
• Taxes: One-twelfth of the annual property tax bill.
• Insurance: Hazard insurance, which is also broken down into 12 payments. This insurance, which is also called homeowner's insurance, protects you and the lender in case your home is damaged or destroyed. This part of your payment can also include mortgage insurance, if required.

The amount you pay each month for taxes and insurance is usually put into what is called an escrow account; it's held there until the money is needed to pay your annual insurance and tax bills.

Debt Ratios

Lenders use calculations, or ratios, to determine the level of housing and overall debt that can realistically be carried by a borrower. Debt ratios are calculated from gross monthly income and monthly debt figures. Borrowers can generally afford to spend no more than 29% of their gross monthly income for housing debt and 41% for overall debt.

You can use the How Much Can You Afford calculator to find out how much of a mortgage you can qualify for based on your monthly income and current interest rates for a fixed-rate mortgage. These figures do not take into account any existing debt you may have that could reduce the loan amount.

Do feel ready to pre-qualify now? Complete our simple, safe and fast online Pre-qualification tool. Don't worry—there's no obligation.