Wednesday, July 19, 2017

What is Mortgage Pre-Qualification?

By Zillow

For many people, buying a home will be the biggest investment they will make in their lives. It’s a huge financial decision that requires careful planning.
However, home shoppers often make the mistake of waiting to reach out to a lender until they find the home they want to buy. The earlier you engage in the financial process, the better. That’s where pre-qualification comes in.

What is Mortgage Pre-Qualification?

If you’re planning to finance your home with a mortgage, the first step is to get pre-qualified. Mortgage pre-qualification is a written statement from a lender stating the loan amount you would qualify for according to that lender’s guidelines. The determination and loan amount are based on your self-reported income and credit information.

Mortgage pre-qualification does not guarantee that you will get a mortgage. Before officially approving you for a mortgage, your lender will require documentation for your income and assets, and will require you to meet specific guidelines for the specific loan type that you’re applying for.

Why Get Pre-Qualified for a Mortgage?

Getting pre-qualified for a mortgage before you start your home search can help set you up for success. It can help you figure out how much you can afford so you’ll begin your home search by looking at homes that comfortably fit in your budget.

Getting pre-qualified also shows that you’re a serious buyer who is ready for the financial commitment of buying a home. It can help strengthen your offer by showing the seller that you can afford a mortgage for the home. However, it does not guarantee that your offer will be accepted.

Mortgage pre-qualification doesn’t always require a credit check, which means you won’t get a hard inquiry on your credit. But it is a good idea to review your credit report early in your home search to catch any errors and identify areas that you can improve. You’ll also get a more accurate estimate of the interest rate you would qualify for, which is important since your interest rate can impact your monthly payment.

How Do You Find a Lender to Get Pre-Qualified?

Zillow has an online tool you can use to find a local lender in minutes who can help you get pre-qualified. Once you find a lender, he or she will conduct a preliminary review of your self-reported income, assets, and other information to determine your loan qualifications based on their guidelines. Then they’ll give you a pre-qualification letter that states the loan amount you will likely qualify for.

Getting pre-qualified by a particular lender does not oblige you to work with that lender. When the time comes in your home search to officially apply for your mortgage, it’s best to shop around and ask for Loan Estimates from several lenders to compare the costs of the loan. Different lenders will have different fees and can even offer different interest rates. But some home shoppers prefer to build a relationship with their lender over time, and may end up getting the best loan offer from the lender who pre-qualified them.

What Happens if You Don’t Get Pre-Qualified?

In order to qualify for a mortgage, you must meet specific criteria for income, credit score, down payment, and debt-to-income ratio. Not everyone will pre-qualify for a mortgage, and not everyone will get pre-qualified for amount of money they think they would. If you find yourself in that scenario, there are some things you can do:

Increase your down payment amount. This can help increase the loan amount you would qualify for, and also help lower your monthly mortgage payments. Learn more about down payments and see why 20% is ideal.

Decrease your overall debt to improve your debt-to-income ratio. Typically, a debt-to-income ratio of 36 percent or less is preferable; 43 percent is the maximum ratio allowed. Use our debt-to-income calculator to estimate your debt-to-income ratio.

Work to improve your credit score by doing things like correcting errors on your credit report, addressing any red flags such as late or missed payments, and reducing the number of hard credit inquiries on your report. Even if you are deemed to have bad credit, you may still be able to qualify for a mortgage. But in general, a score of 720 and higher will help you get the most favorable interest rates.

My name is Scott Grebner and I have been helping my clients realize their own personal real estate dreams. Real estate is a relationship-based business that works best when client relationships are built on trust and confidence. My goal is having clients be completely satisfied with the professional and caring service they have received.

The role of technology is rapidly changing how the real-estate market functions in this country today. Re/Max Preferred Choice is embracing these new mediums of communication to better serve our customers. We have created our company to better place important information in your hands to help you with your housing needs. For a personal consultation please contact me at my Website.

It seems that the dream of past generations was to pay off a mortgage. The dream of today’s young families is to get one. I would love to hear from you, about your Real Estate Dreams and questions.

No comments:

Post a Comment