Prequalifying Is Advantageous
Before the economic recession and the crash of the housing market, getting approved for a mortgage was fairly easy. Even those who were high risk buyers were often approved, even without a verifiable income.
However, changes in the house market and the economic downturn has worked against buyers, making it more difficult to get a mortgage. For this reason, more people are working to prequalify for mortgage before they begin the home shopping and buying process.
The process for mortgage prequalification is fairly easy and it provides some excellent benefits. Take a look at some of the benefits that prequalification can offer as well as some information on how to prequalify for a mortgage.
The Difference Between Prequalifying and Applying for a Mortgage
First, it is very important that home buyers understand the differences between actually applying for a mortgage and prequalifying for one.
When you prequalify for mortgage, you’ll only provide a simple outline of your financial details and the lender will come up with an approximate amount of funds that they “may” offer to the consumer who has applied for prequalification.
Prequalification doesn’t require the payment of any fees, but this does provide buyers with documentation that shows they are a serious buyer and that a lender is willing to offer them a mortgage.
While this doesn’t guarantee that the buyer will be able to get the loan for the home, it does show the probability that they will qualify and also gives buyers an approximate amount of money they can work with when purchasing a home.
Top Benefits of Mortgage Prequalification
If you prequalify for mortgage, you’ll quickly find that prequalification can provide a variety of excellent benefits. One of the main benefits is that this provides you with an approximate amount that you can spend on a home.
Knowing the amount you can spend can help buyers to look at realistic options that will help reduce the search time they go through when trying to find the perfect home. It will also help real estate agents match up buyers with homes that meet their financial needs.
Another benefit you can enjoy if you prequalify for mortgage is that this prequalification shows home sellers that you are serious about purchasing a home. It helps to assure them that the deal will not fall through because the funding is not available.
With the tough market that sellers are dealing with today, they are more comfortable going into a deal with buyers that are already prequalified, since it lowers their risk. You are more likely to get the deal you want on the home you want when you can show that you have already been prequalified for a home loan.
How To Prequalify For A Mortgage
Now that you understand the benefits of prequalifying for a mortgage, you may be wondering how to prequalify for a mortgage so you can enjoy these benefits. The good news is that this process is simple and it’s easy to get started right away.
The first step to take to prequalify for mortgage is to get your finances in order. It’s important to take a look at your credit report so you have an idea of the possible interest rates that you may have to pay. Even during prequalification, lenders are going to closely look at your credit report.
It’s best to check your report and ensure there are no errors on it that can stand in the way of being prequalified. If there are errors, dispute them and have them eliminated from your report.
Another step to take when you want to know how to prequalify for a mortgage is to complete all the financial documents that the lender requires. While every lender is a bit different in their requirements, most are going to require certain basic financial information.
Some of the financial information they may require include paycheck stubs, tax returns, saving and checking account information, and more. Having everything prepared financially can help you get prequalified for the loan you need and it can also make the actual lending process a lot faster for you as well.
Of course, when you decide to prequalify for mortgage, make sure you prequalify with a quality lender. You need information that is timely and accurate to make the buying process as smooth as possible.
Before you start looking for homes, go ahead and get that prequalification letter from a lender. You’ll be surprised at how much easier this makes the entire real estate transaction.