Pre-Qualification: Buyer's & Seller’s Peace of Mind!
To enhance your chances of having a problem free experience when purchasing your new home get pre-qualified and/or pre-approved for a mortgage loan prior to putting in an offer on a particular house. This will prove to be a good example of your seriousness and ability to purchase a new home.
What is pre-qualification?
Pre-qualifying for a mortgage loan means asking the lender of your choosing, this can also sometimes be any local banking institution that you hold either a saving or checking account with, if you can qualify for a loan of your choice before you begin shopping for a home. The lender will give you an estimate of how much mortgage money you can borrow based on your credit report, income, expenses and long term debts. At this point, there are no
fees for this service.
Generally, your mortgage payment, home insurance and property taxes cannot exceed 28 percent of your pre-tax or gross monthly income. Your housing costs plus other major long-term debts, such as car payments, cannot exceed 36 percent of your pretax or gross monthly income. This is a merely a guideline and can deviate. It gives you an opportunity to get your finances in order if you don't meet the guidelines.
How is pre-qualifying different from pre-approval?
To pre-qualify, means exactly that; to find out if you can qualify. If you don't, then you will need time to get your finances in order so that you can qualify. If you do pass the pre-qualifying guidelines, then you can move on to pre-approval.
The pre-approval process starts with an application you fill out completely, listing your income, expenses and long term debts. The lender will verify your income and employment and current housing. The lender will also provide you with a 'good faith estimate' of closing costs and details of the loan you choose. When this all proves satisfactory,
you are pre-approved! You will know the amount of the mortgage they will give you, the down payment you will need and a 'good faith estimate' of closing costs associated with the mortgage loan.
Being pre-approved for a mortgage loan eases the entire transaction including the closing process. It can also help in negotiating the price and terms of the home you want to buy. It gives you more clout with the sellers because they are dealing with someone not only ready and willing, but able to purchase. You are in an excellent bargaining position, and can close the deal quickly.
Now, it's time to start shopping for your dream home!
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