One of the first steps in homeownership is understanding how much home you can afford. A prequalification is an informal evaluation, usually done by a lender, of your creditworthiness. Not sure if you are financially ready to invest in Hawaii real estate? Here are helpful stats you need to know:

  • What is your annual income?
  • How many years will the term of the loan be?
  • What is the interest rate?
  • How much money do you want to borrow?
  • What is your credit score?
    • Excellent (740+)
    • Good (680-739)
    • Average (620-679)
    • Below average
  •  Have you been employed full time for the past two years?
  • Are you saving for a down payment?
  • Do you have past credit issues such as bankruptcy in the last four years?
  • What are your monthly recurring debt payments?
There may be more information your lender will ask but knowing these numbers will give the bank a good idea where you stand financially.
What you should know?
  •  Debt-to-income ratio or DTI. This is a formula that most lenders use to determine your prequalification. Back-end DTI is calculated by figuring all your debt divided by your gross monthly income. You want this number to be no greater that 36% for a conventional mortgage. Government-backed loan programs may allow a higher percentage.
  • The best way to qualify for a higher loan amount is to increase your income. This will improve your
    DTI. Be sure to use your new income to pay down your debt. This will also give you a better DTI.