How to Qualify for a Home Loan

How to Qualify for a Home Loan
By Claude L’Heureux, SVP Community Bank of Oak Park River Forest

Begin by preparing a budget.  Before you begin looking for a home, you need to know how much home you can afford to buy.  Start the process by comparing your monthly income with your monthly expenses.  When deciding how much you can spend on buying a home, take into account real estate taxes, homeowner’s insurance premiums, utilities, and maintenance.  Remember, when you purchase a home you are responsible for the upkeep and cannot rely on a landlord when something goes wrong.  In effect, you are your own landlord.  Also be sure to begin the process with reasonable expectations and try not to bite off more than you can chew. 

The next step we highly recommend is to review your credit history.  You can obtain your free credit report by visiting  There are three major credit bureaus: Equifax, Experian and TransUnion.  Examine your reports closely, and if you find any errors be sure to report them as soon as possible.  Lenders will look closely at your credit report, so make sure the information is accurate.  Lenders will also make a judgment based on your credit scores.  A consumer has three credit scores, known as the FICO score, one for each of the three major credit bureaus.  You can review your credit reports once a year for free, but there is a small fee to receive your FICO scores.  If you have a low credit score, the lender may reject the application, require a larger down payment, or charge a higher interest rate.

Find a trusted mortgage lender.  This is someone who will help you obtain the loan to purchase your new home.  There are many lenders throughout the Oak Park area, including Community Bank of Oak Park River Forest.  Go with the person you trust, as well as someone who can help you obtain the best loan for your situation.  If you are a first time home buyer, you should consider attending an educational seminar to learn more about the ins and outs of buying and financing your new home.  The Oak Park Regional Housing Center is one source for that seminar.

Next you will need to get either pre-qualified or pre-approved.  Before you begin working with a real estate agent, you will likely be asked to obtain a pre-qualification letter. To begin the process your lender will want to discuss your financial situation, including your income, assets and debt.  This letter does not guarantee how much the bank will be able to lend, but it does provide an estimate of the loan amount for which you may qualify.  This is not a guarantee, it is simply a ballpark estimate based on what you have told the lender.  On the other hand, the process for pre-approval is more formal and requires support documentation.  When you get close to making an offer on a home, you will need to submit a loan application along with required documentation that allows the lender to determine exactly how much you qualify for. Again, you should consider your monthly budget when choosing a home.  Just because you are pre-approved for a certain amount does not necessarily mean you should buy the most expensive home possible.

Qualifying for a home loan may seem intimidating, but remember to take your time and learn as much about the process as possible.  The better educated you are, the more likely you will be to find a loan that is right for you.

Claude L'Heureux - NMLS# 802841
Community Bank of Oak Park River Forest - NMLS# 288792

-as seen in The Oak Parker

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