We have a guess post blog this week by Andrew Hill @ NewHome Source written about Prequalifing for your mortgage loan. I want to point out that terminology differentiates in different parts of the country. So to eliminate confusion, I just want to point out that there is a difference between prequalification and a preapproval. A prequalification is not always a preapproval, because a preapproval only occurs after your mortgage company receives and verified your documents that back up the information you provided to them about your income, assets, liabilities and job experience. When you punch in answers to a set of questions online and are given a mortgage prequalification, this is not going to hold a lot of weight when it comes time to put in an offer to buy a home. Please be sure you are working with a qualified Realtor who has a valid Preapproval Letter waiting for you!
Prequalification: What is it & Why
does it Matter?
So you’ve decided you’re ready to buy a home.
Congratulations! Whether you’re a first time buyer or an expert in real estate,
the first thing you’ll want to do it get prequalified for a home loan. You probably
have heard this term before, but what exactly does it mean to ‘prequalify’? In
short, pre-qualification is an assurance by the lender, which determines the
highest loan amount that you qualify for.
Why should
you prequalify? For starters, it saves you time and money. Buyers who are
pre-qualified are able to consult better realtors and thus receive better
service. Pre-qualified buyers are also given preference in multiple-offer situations
and can negotiate for a better price than those who haven’t been prequalified.
Given these
benefits, you may be asking yourself, “How can I get prequalified?”
In order to
do prequalify, you’ll need:
1.
Credit reports
2.
Online mortgage/finance services
3.
A lender
The process
essentially consists of you and a lender (or a mortgage broker) looking over your
credit history and your debt to income ratio, for which you’ll need to provide
your gross monthly income and total monthly payments. Depending on your unique
situation, the lender you’re working with may ask for other documentation and
information regarding your finances.
In order
for you and the lender to look over your financial background and current
situation, you’ll need to give your lender authorization to pull your credit
report. After your information has been evaluated, the lender will construct a
letter of prequalification for you, which states that they have reviewed your
credit and financial information.
With this
little letter in hand, you’ll be that much closer to finding the home of your
dreams.
Tips:
-To find a
good lender, ask for a referral from a trusted relative, friend, or co-worker.
-Prequalification
is usually a free service. If the lender tried to charge you, find a different
lender.
-You don’t
have to do business with the lender that prequalifies you. Shop around, compare
rates, and choose the lender who has the best offer.
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