Why Homebuyers Should Get Pre-Qualified for a Mortgage
If you’re thinking of buying a new home, you have no shortage of to-do’s. You are likely making a list of must-haves for your new home, looking for houses to tour and getting ready to pack up your existing home. Whether you’re buying your first home or your fifth, it is a good idea to get pre-qualified for a mortgage loan before you start the process.
What is Mortgage Pre-Qualification?
Mortgage pre-qualification gives you an idea of how much you can afford to spend on a home. The process of getting pre-qualified is fairly simple. You supply a bank or lender with information about your income, debt, assets and credit score. Based on this information, your bank or loan officer can tell you a rough estimation of the mortgage loan amount you could qualify for.
Benefits of Getting Pre-Qualified
There are a variety of benefits to getting pre-qualified for a mortgage before you start the home buying process, such as:
Helps you set a budget – Knowing the loan amount you can expect to be approved for helps you determine how much you want to spend on a house. This is especially helpful if you already know how much you’ve saved and are able to use for a down payment.
Narrows down your house search – By having a cost range in mind, you’re able to look at and tour only the houses you know you can afford to buy.
Saves you time – If you’re already pre-qualified, it’s easier to make an offer on a home, knowing you’re likely to be approved for a mortgage that meets your needs. Since your lender already has some of the paperwork needed, this also helps speed up the process for the actual loan approval.
Gives you an advantage with the seller – When the market is hot and homes are selling quickly, it’s common for a seller to have multiple buyers making offers. Knowing you are pre-qualified and more likely to be approved for a loan can give you an advantage over buyers who have not yet gone through this process.
While pre-qualification can streamline the home buying process, it’s important to remember that being pre-qualified does not mean that you are guaranteed to be approved for a loan of same amount. However, it does provide a good estimation of the loan amount you can expect, especially if your financial situation does not change between the time you’re pre-qualified and the time you apply for a mortgage loan.