The main thing you need to check before applying for a mortgage in America is your credit score and clearing up any errors in your financial report. Big companies like Fannie Mae and Freddie Mac set the rules of the market, so even a small mistake in your history can cost you tens of thousands of dollars more in interest over 30 years.
Buying your first home in the US is the dream of every Albanian immigrant, but rushing to apply for a loan without being well prepared can lead to rejection or high interest rates. Here are 7 key things you should definitely check:
1. Credit Score
Your points directly determine the interest rate you will receive from the bank.
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- Rule: To get the best interest rates, you need a score above 740. Check your report for free through AnnualCreditReport.com to make sure there are no errors or debts that don’t belong to you.
2. Debt to Income Ratio (DTI Ratio)
The bank wants to know what percentage of your monthly income goes to paying off existing debts (credit cards, car loans, student loans).
- Rule: This ratio (Debt-to-Income) should ideally be below 36% , and never above 43%–45%. Pay off and close as many small debts as possible before applying.
3. Employment History
Banks in America want to see assurance that you can repay the loan each month.
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- Caution: You need at least 2 consecutive years of stability in the same field of work or in the same profession. Do not change jobs or become self-employed shortly before applying for a mortgage.
Down Payment and Cash Savings
Many people think they only need to pay the amount of the “down payment” (e.g. 3.5% for FHA or 5%-20% for conventional loans).
- Be careful: You’ll need extra money for “Closing Costs,” which cost 2% to 5% of the home’s value. The bank also wants to see “reserves”—at least 2 to 6 months of credit payments left in the account after the purchase.
- Prohibition of large banking movements
Every penny that goes in or out of your bank account will be strictly controlled by the person who verifies the loan (underwriter).
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- Don’t: Do not transfer large amounts of money between accounts without documentation, do not deposit cash without proof of source, and do not accept monetary gifts from family members without signing an official “Gift Letter”.
6. Do not apply for other loans (New Credit)
When you apply for a mortgage, the bank does a thorough check (hard inquiry) of your credit. They will do this check again the day before you finally sign for the house.
- Golden rule: Don’t buy a new car, don’t get furniture on installments, and don’t open any new credit cards during this process. This could disqualify you at the last second.
7. The difference between Pre-Qualification and Pre-Approval
Many buyers make the mistake of going out looking for homes with only a “Pre-Qualification,” which is just a superficial assessment based on what you say.
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- Solution: Request an official Pre-Approval Letter from a lender like Rocket Mortgage or Chase Mortgage . This shows that the bank has checked your taxes (W-2) and guarantees that you are a serious buyer.
If you are preparing to buy a home in the US, tell me FOR COMMENTS
- Are you an employee with a W-2 (monthly salary) or are you Self-Employed (with a 1099) ?
- In which state are you looking to buy a house?