Even before you start looking for your ideal house, you first need to know what is it that you can afford and what you can not. Different mortgages have different qualification guidelines and it would be in your interest to sit with your lender to see which mortgage best suits your needs. Speak to multiple mortgage companies if required to check whether you will get pre-qualified for a mortgage.
A pre-qualification is the process of determining the amount of loan you can afford to take out. Here a mortgage company will analyze your financial situation taking into consideration your income and your debts. Based on these analyses you will get pre-qualified for a mortgage. Please note, pre-qualification is not the same as pre-approved. They are two different things.
Under pre-qualification, a lender will give you a pre-qualification certificate stating the maximum amount of loan you can qualify for. This certificate is issued after verifying your income, employment and credit history. A pre-qualification is no guarantee for approval of loan but it assists you in ensuring that you will go on to apply for a mortgage that is within your means.
Normally to get pre-qualified, there are no fees applicable. What can be the benefits of pre-qualification?
- If you are pre-qualified you are in a better position to negotiate with the seller since you know what you can afford to pay.
- Most real estate agents only work with clients who are pre-qualified
- Getting pre-qualified with act as a road map to ensure you look at only what you can afford.
You do not have to use the same mortgage company who did your pre-qualification process to get your mortgage from. You are free to use any other mortgage company who offers you a better deal. So take out to shop around a bit.
With the internet growing exponentially, there are lender who do the pre-qualification process online. You can fill up the online form to facilitate this process. Remember, the pre-qualification includes getting your credit scores. Normally FICO scores are used by a vast majority of lenders
Once you get pre-qualified, do remember to ask the mortgage company as to when your loan would be approved. This will help you putting the right date in your agreement with the seller of the property. When you get your pre-qualification letter, only put the amount you are asking for and not what you have qualified for. This way the seller will not know how much more can get. It will put you in a better position.
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