Step #1 of buying a home is the Pre-Qualification Process.
It’s pointless to go out looking and fall in love with a $250,000 house if you only qualify for a $215,000 purchase price, hence why this is Step #1. Getting pre-qualified will show you what purchase price you qualify for and will give you an idea of what to expect for a monthly payment.
Once you have you fully pre-qualified and pre-approved for your home, you can request a showing and get an Official Pre-Approval Letter if needed.
An Official Pre-Approval Letter is a document that shows both your real estate agents and the sellers that you have spoken with a qualified mortgage lender and that they have verified that you’re ready to purchase
Once you have that document, you’re ready to begin touring homes and making offers.
If you’ve been researching the home buying process for any length of time, you’ve probably encountered the terms pre-qualify and prequalification. These terms are often used in relation to mortgage loans. For instance, a lender’s website might invite you to “Click here to pre-qualify for a home loan.” They’ll explain how easy the process is, and that it only takes minutes. This is usually followed by a web-based form that requests information about you.
But what is mortgage prequalification exactly, and how does it help you when buying a home? What are the steps involved in the process? And is it even worth the time? These are some of the questions we will address in this mortgage tutorial.
What It Means to Pre-Qualify for a Home Loan
When you pre-qualify for a home loan, the lender will review your income to give you a general idea how much you are able to borrow. But “general” is the key word here. Mortgage prequalification is not a commitment to lend. Nor does it guarantee you will actually receive that amount from the lender. It’s just a way to get the ball rolling — a way to open up the dialogue between you and the mortgage lender.
In most cases, prequalification paves the way to the next step in the process, which is pre-approval. The difference between these two terms has to do with the level of scrutiny involved:
What’s the difference between a prequalification letter and a preapproval letter?
Prequalification and preapproval both refer to a letter from a lender that specifies how much the lender is willing to lend to you, up to a certain amount and based on certain assumptions. These letters provide useful information, but are not guaranteed loan offers.
There’s not a lot of difference between a prequalification letter and a preapproval letter. While there are some legal distinctions, in practice both terms refer to a letter from a lender that says the lender is generally willing to lend to you, up to a certain amount and based on certain assumptions. This letter helps you to make an offer on a home, because it gives the seller confidence that you will be able to get financing to buy the home. It is not a guaranteed loan offer.
Don’t worry about which word lenders use. Some lenders may use the word “prequalification”, while other lenders may call the letter a “pre-approval”. In reality, lenders’ processes vary widely, and the words they use don’t tell you much about a particular lender’s process. The important thing is that the letter you receive provides enough information for sellers in your area to take it seriously. The best way to make sure that the letter you have will serve its purpose is to ask a local real estate agent.
Lenders usually check your credit when issuing a prequalification or preapproval letter. Many people wait to get a pre-approval letter until they are ready to begin shopping seriously for a home. However, getting preapproved earlier in the process can be a good way to spot potential issues with your credit in time to correct them.
Getting pre-approved is when a housing provider such as Fort Wayne Listings™, or sometimes a bank or lender, performs a very basic review of your financial situation, in order to tell you how much of a home loan you can get. You can think of it as a free consultation between you and the loan officer.
Home pre-approval is a more in-depth version of this process. Here, the lender actually verifies your income, your debt level, and other aspects of your financial situation. They’ll also check your credit score to see where you stand in that department. They do this to determine two things: (1) whether or not you are qualified for a home loan, and (2) how much of a loan they are willing to give you.
Let us help you with Step #1 today
Get Pre-Approved today!
Process takes roughly 10 minutes