What is Pre-Qualification, and why is it so important?
An informal estimate for how much a buyer can borrow
Assures agent and seller that you are within the price range
Smoother and quicker process for buying a new home
What is the difference between Pre-Qualification and Pre-Approval?
Both pre-qualification and pre-approval provide borrowers with an estimate of how much they can afford. For a pre-qualification, a lender will collect only basic information. For a pre-approval, the lender will formally verify your financial information. Both will provide what is needed to begin house-hunting with confidence.
The benefits of getting pre-qualified.
When prospective buyers find a house they like, the first thing the seller wants to know is if the buyer can realistically afford the cost. When sellers aren’t sure if the buyers have sufficient resources, they sell to another buyer who does. So, being able to prove to a seller that you can qualify for the right mortgage amount can make the difference between getting your dream home or losing out. This is where the process of pre-qualification can make buying a home easier.
And, since pre-qualification also helps homebuyers understand how much they can reasonably afford to pay for a home, they can stay within the right price range during house-hunting, and they are more likely to be approved for their mortgage once they find their house.
What you need to get pre-qualified for a mortgage.
In order to get pre-qualified, a prospective homebuyer will provide some information such as:
Borrower Information: These are the basics about the applicants, including, but not limited to: Name, address, Social Security number, date of birth, marital status, dependent information, and current address.
Assets: Providing asset account (such as savings accounts, checking accounts) information will help determine the source of down payment, closing costs and additional funds needed in the event of a financial emergency.
Employment and income: Providing your income and employment history is basic information you will need to obtain a pre-qualification. Income sources and their history will help determine what mortgage you can afford and your ability to pay it back.
Liabilities: Include outstanding debts, such as credit card balances, installment loans (i.e., car loans or student loans) monthly alimony and child support, including the payment amount, balance owed and whom it is owed to.
Declarations: Here you will confirm whether your financial history includes outstanding judgments, a bankruptcy, foreclosure or lawsuits.