What You Need To Know About Getting Prequalified for a Mortgage
Before you start your new home search, knowing how much you can afford is an important first step to the process. The way to find out is to get prequalified for a mortgage. If you are in the market for a new home and need to get prequalified, you first need to know what is mortgage prequalification, how it works and is it worth it?
When a Realtor or lender talks about being prequalified, they are referring to mortgage prequalification. This is basically a lender’s estimate of how much you can borrow on a loan. Any professional in the industry will tell you that this must be the first step to purchasing a home. It will let the seller know you are a serious buyer and it will let you know how much you can afford.
This process might sound complex but it is quite simple. First shop around for a lender as this will allow you to explore different mortgage options and different lender incentives. Then you will need to fill out the prequalification forms. Most banks and creditors have these forms online for your convenience.
Before starting a form have the following information at hand, your name and address, contact details, a figure for your stable monthly income, basic data on your bank accounts, savings and other assets, your desired loan amount, how much you can afford to put down as a downpayment, and your information for a credit check.
As far as a credit check, this is considered a soft inquiry so it will not affect your credit score. Your credit history is one of the big parts the lender will look at for prequalification. In fact, many lenders may not even take a good look at your proof of income and assets. Once the lender has your credit history, they can determine if you can qualify for a loan and how much they are willing to let you borrow.
Many people can get prequalification confused with preapproval. They are two different processes and have different requirements and implications. Prequalification is just getting the lender to look at how much you can afford and if you would be qualified. This is a no-strings-attached deal and does not guarantee that you will be approved by the lender for the amount estimated in the prequalification process.
Preapproval is more in-depth and the lender will look more into your creditworthiness. The paperwork is more detailed and you will have to provide pay stubs, bank statements and tax records. It will take the lender around 10 days to get you preapproved. Once you are pre-approved the lender’s offer lasts for around 90-days.
Many potential homeowners question whether it is worth getting prequalified since you will have to be preapproved anyway. They ask the question is it worth it? Lenders and professionals in the industry say yes. It is a quick and easy way to see how much you can afford and if you have a chance at being qualified for a mortgage. Purchasing a home is one of the most stressful activities and having the peace of mind that comes with mortgage prequalification is worth it.
