When you decide to buy a home, you’re faced with many questions that you need answers to. Do I make enough income to buy a house? How much of a house can I afford? What kind of mortgage am I able to get? Getting pre-qualified for a mortgage loan can give you initial answers to these questions.
Pre-qualification is one of the first steps you’ll take to help position yourself as a strong homebuyer. We explain what pre-qualification is, why you should get pre-qualified, and how to complete this part of the homebuying process.
What Does It Mean To Get Pre-Qualified?
Pre-qualification and pre-approval are two different ways you can prepare before taking out a mortgage loan. These terms are sometimes used interchangeably, but they actually mean two different things.
Pre-qualification typically comes before pre-approval. With pre-qualification, you’ll give your lender an overview of your finances, and they’ll provide an estimate of what mortgage amount you may qualify for. Typically, there is no credit check performed. Keep in mind, this is not a guarantee you’ll be approved for a mortgage. It’s simply a maximum loan amount that you could receive based on your financial background.
During the pre-approval process, you’ll complete a formal application. Your lender will review your finances, including income, debts, expenses, credit history, and other information, to verify that you’re eligible for a mortgage. If you qualify, your lender will give you a pre-approval letter that you can use as a resource when searching for a home.
WHY IS GETTING PRE-QUALIFIED IMPORTANT?
When you’re getting ready to buy a home, you want to do everything in your power to set yourself up for success and be a strong candidate. That’s why getting pre-qualified is a smart idea. It prepares you with some valuable preliminary information that will help you when looking for a home to buy. The reasons to get pre-qualified include the following:
- You’ll get an idea of your budget. With pre-qualification, you’ll get an estimate from the lender about how much money you could be approved for. This will help you know what price range of homes to look for and prevent you from considering homes that are over your budget.
- Gives you an advantage over other buyers. When a seller is deciding which offer to accept on their house, they don’t want to have any hesitations in mind. Being pre-qualified may give you an edge over other buyers since it shows that you’re proactive and serious about buying a home. If your competition doesn’t have pre-qualification, you might be a more appealing buyer to the seller.
- Saves time and solves problems early on. When you get pre-qualification, you’ll have to prepare some personal financial information. During this time, you may come across errors in your documentation. Discovering this early in the process can help save time in the long run by allowing you to resolve any issues before starting your loan application.
- Helps you plan other expenses. Having an established home loan budget helps you plan for the additional costs you’ll have as a homeowner. You’ll need to be prepared for expenses like homeowner’s insurance, property taxes, and private mortgage insurance. Also make sure to account for other life expenses outside of home-related ones, so you don’t risk going over the amount the lender can provide.
WHEN TO GET PRE-QUALIFIED FOR A MORTGAGE
The optimum time to get pre-qualified is after you’ve decided to buy a home and before you start house hunting. It’s best to look for homes that you can realistically afford when you know how much you can spend. That’s why this is one of the initial steps you should take before setting out to find your dream home.
While pre-qualification doesn’t technically expire, make sure not to do it too far in advance of looking for homes. It’s possible that if you wait too long between pre-qualification and buying a home your job or financial situation may change, making the budget estimate no longer relevant.
HOW TO GET PRE-QUALIFIED FOR A MORTGAGE
The process for getting pre-qualification is straightforward. Once you’ve chosen a mortgage lender to work with, you can start the process with them, typically on their mobile app, website, or by speaking directly with a loan officer. Make sure to have your basic financial information on hand to start the process. While it depends on the lender, pre-qualification generally takes one to three days.
Getting pre-qualified is your first step on the way to becoming a homeowner. We can help you easily complete this step of the home buying process. Start the pre-qualification process now or contact one of our experienced loan officers to answer any questions you have about this step.