Getting Pre-Qualified for A Mortgage
If you’re in the market for a new home and plan to finance the transaction, one of the first tasks to check off your list is getting a mortgage prequalification. By taking this important step, you will save time, streamline the process, and move closer to living in the home you’ve imagined.
What is mortgage prequalification and why do you need it?
For the purposes of our discussion, a prequalification, or preapproval, is more than just an estimate of what you can afford. It means that a bank has pre-approved you for a home loan up to a given amount–usually for a limited time–by verifying your credit history, employment, debt-to-income ratio, and other financial information that you provide.
You can prepare for your mortgage prequalification by gathering important documents, such as pay stubs or bank statements that will allow a lender to verify your income and expenses. If you haven’t done so already, this is also a good time to order a free credit report, which Federal law entitles you to receive every 12 months. Once you receive your report, you can assess your status, research ways to improve your credit score, and learn about general guidelines for keeping it in good standing.
When you prequalify for a mortgage, it gives the seller a comfort level that you meet the qualifications to purchase a home within specified limits, although it is not a loan guarantee. Also, keep in mind that a preapproved mortgage does not commit you to a particular lender for the home purchase. You may choose a different lender when you later buy the home and go through the full loan application process.
When should you get a mortgage prequalification?
Since many sellers require you to prequalify for a home loan before they will accept an offer, it makes sense to get a preapproval before you begin your home search. By doing so, you’ll avoid the heartache of finding a home you love and having to wait for mortgage prequalification—which could delay the process while another potential buyer is snatching up the home of your dreams. With this said, it’s also important to remember that the prequalification will have a limited shelf life. Due to time-sensitive factors such as the credit check and current mortgage rates, your prequalification certification may be valid for only 60 or 90 days. For this reason, it makes sense to get prequalified just before you begin your home search.
Where can you get prequalified for a home loan?
Most lenders can provide the mortgage prequalification service. In selecting a lender for your prequalification, talk to friends, family members, and other trusted advisors. If you have already decided on an established new home builder such as Hakes Brothers, their sales team can refer you to a reputable lending company and guide you through the prequalification process. Once you receive trusted referrals, call the loan officers, explain your home search plans, and determine which company will work best for you. Whether you are a first-time buyer or purchasing your forever home, be sure to compare standard fees and interest rates for the types of loans (FHA, VA, etc.) that fit your unique parameters.
What else should you know about mortgage prequalification?
One of the most important things to keep in mind when it comes to mortgage prequalification is that, despite the amount a bank is willing to loan you, it is still up to you to determine your own financial comfort level. If you are preapproved for an amount that exceeds your established budget, then by all means stick with your plan. When it comes to buying a home, adhering to a well-designed financial strategy will help you weather potential challenges and take advantage of future windfalls. So, get prequalified, stay on course, and let the home search begin!
If you need additional information about the steps to getting prequalified, our team of new home sales professionals can help steer you in the right direction. Already pre-qualified? You’re already one step ahead. Find a location that is best for you and discover new construction homes by Hakes Brothers.