Whats The Primary Benefit Of Being Prequalified For A Mortgage
Getting prequalified for a mortgage will help you determine the price range of homes you can afford. It can also give real estate agents and home sellers confidence you can afford to buy a home. Getting pre-approved can give agents and sellers even more confidence you can afford to buy a home because it is based on verified financial information. Getting preapproved also helps you collect the documents you will need when you complete your mortgage application.
Which Is Right For Me
First-time homebuyers are more likely to find that getting prequalified is helpful, especially when they are establishing their homebuying budget and want an idea of how much they might be able to borrow.
Preapproval can be extremely valuable when it comes time to make an offer on a house, especially in a competitive market where you might want to stand out among other potential buyers. Again, a seller will be more likely to consider you a serious buyer because you have had your finances and creditworthiness verified.
Ready to prequalify, get preapproved or apply? Get started with the Digital Mortgage Experience.
How Does Getting Prequalified Affect Your Credit Score
Prequalification usually involves a soft credit check, meaning it will not negatively affect your credit score. That said, getting prequalified is only the first step toward getting approved for a mortgage. To get preapprovedor approvedfor a loan, your lender will ultimately run a hard credit inquiry to get a more comprehensive picture of your creditworthiness.
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What Is The Home Loan Process
For Landlords And Investors
If you rent out an investment property, your tenants rent payments can count toward your income. This can help you qualify for the new mortgage.
For documentation, youll need to provide a current lease that shows the rent amount.
Credibles pre-approval process is quicker than most it takes just a few minutes and can help you compare prequalified rates from all of our partner lenders conveniently online.
Credible makes getting a mortgage easy
- Instant streamlined pre-approval: It only takes 3 minutes to see if you qualify for an instant streamlined pre-approval letter, without affecting your credit.
- We keep your data private: Compare rates from multiple lenders without your data being sold or getting spammed.
- A modern approach to mortgages: Complete your mortgage online with bank integrations and automatic updates. Talk to a loan officer only if you want to.
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How To Get Prequalified For A Home Loan
You want to start off by shopping around for lenders that seem to be offering good deals on mortgages. The mortgage rates they’re advertising will be the first thing to catch your attention but don’t focus solely on that.
The , is a reflection of both the mortgage rate and the fees charged on a loan, and is a better guide to the total cost of a loan. By law, it has to be included with any advertisement of a mortgage rate.
To prequalify for a mortgage, you’ll need to provide the lender with basic information about your income, credit rating, debt load and how much of a down payment you can make. You don’t have to document these, you’re just describing your financial situation so the lender can give you an estimate of how much you could borrow and what sort of rate to expect. That’s what prequalifying is an estimate of how much you could borrow.
That being said, you want to be as accurate as possible with the information you provide. It doesn’t do you any good to exaggerate your income or credit score, or minimize your debt load. You need to provide accurate information to get an accurate estimate of what you can borrow and the rate you can get.
You can often get prequalified for a home loan online. You can go to a lender’s web site or use a form such as the one on this page to request a rate quote from lenders. Such forms typically let you obtain rates from multiple lenders, which saves time and lets you compare multiple offers.
How To Prequalify For A Mortgage
You have decided to buy a house, but don’t have enough money to make the purchase. Your situation isn’t unique, few people have enough cash on hand to buy a home. However, banks and mortgage companies offer loans, called mortgages, which provide people with the difference between what they have saved and the price of the home they wish to purchase.
While many people find the home they want and then look for a mortgage, it’s a good idea to look at your mortgage options first. It’s important to know how much you’ll be able to borrow before you find a house.
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Getting Your Mortgage Prequalification Letter
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A prequalification letter is a mortgage lenders best guess of how much you can borrow based on their initial review of your finances. Getting prequalified for a mortgage can help you avoid falling in love with a house outside of your budget. Additionally, having a prequalification letter will show a seller you have a lenders backing and can afford to buy their house.
What Does A Preapproval Letter Include
A preapproval letter includes your name, the price of the home you gave when requesting the preapproval, the loan amount youre preapproved for and the expiration date of the preapproval. Some lenders also include conditions related to the preapproval in the letter, such as it only applying to a single-family home instead of multi-family property.
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Questions To Ask Your Lender Or Broker When Getting Preapproved
When getting preapproved, ask your broker or lender the following:
- how long they guarantee the preapproved rate
- if you will automatically get the lowest rate if interest rates go down while youre preapproved
- if the pre-approval can be extended
Ask your lender or broker about anything you dont understand.
Getting Prequalified Is A Simple Way To Ease Into The Process
If youre curious how much you may qualify to borrow, getting prequalified can be a valuable step in the home-buying process. Its quick and easy to do, and depending on the type of prequalification, may not affect your credit report. Youll need to provide some basic financial information, such as debt, income and assets. With this knowledge youll be able to answer: How much house can I afford? Or crunch your own numbers to estimate your monthly payment, affordability and more.
Lets get you closer to your new home.
Prequalification helps you see how much you might be able to borrow.
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Complete A Home Loan Application
To get pre-approved, you need to fill out a mortgage loanapplication. Your lender will usually let you complete yourloan application online, over the phone, or inperson. Online applications typically take 10-20 minutes to complete.
The loan application, also knownas Form 1003, asks for your personal information, financial information andloan information.
After your application iscompleted, the lender will pull a three-bureau credit report known as atri-merge. This report shows your credit scores and credit history.
Note, you canapply and get pre-approved with any lender you wish. You can even getpre-approved by more than one lender to find the best offer.
Pre-approvalsare non-binding, and youre free to switch lendersbefore taking out the loan.
How A Mortgage Preapproval Affects Your Credit
The credit check required for a mortgage preapproval is identical to the one performed when you apply for a mortgage. This check is considered a hard inquiry on your credit report, which can temporarily lower your credit score a few points.
If you fill out several applications in the process of shopping for a new loan, credit scoring systems treat the credit checks related to those applications as a single event, as long as you make them within a few weeks of each other. Note that the various FICO® Score models will combine inquiries made within the same 45-day period and treat them as one event the VantageScore® system uses a rolling two-week window that resets each time you make a similar loan application within two weeks of the one that preceded it.
This allows you to shop around for the best possible terms without worrying that each credit inquiry will harm your ability to qualify for a new loan.
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How To Get Preapproved For A Mortgage
The preapproval process is essentially a mortgage application. This means your lender will want to take a comprehensive look at your finances. You should be prepared to provide information on the following:
- Proof of income
- Debt-to-income ratio
Before starting the preapproval process, you’ll want the necessary documentation to ensure the process goes smoothly. Here are a few items you should have on hand:
- W-2 statements
- Social Security number
Once you’ve submitted all your information to the lender, you can expect to receive your loan estimate within 3 business days, though this may be much shorter if you use an online lender. The loan estimate will let you know whether you’ve been preapproved and for how much.
How Do You Find A Lender To Get Pre
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 theyll 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, its 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.
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Can You Get Denied After Being Pre
Yes, you can get denied for amortgage loan even after being pre-approved for it. There are a number ofreasons this could happen.
For example, after your pre-approval, newnegative information could appear in your credit history, dropping your scorebelow the lenders qualification guidelines.
Or, ifyou lostyour job prior to closing on the loan, youd likelybe denied. Thats because the lender can no longer verify youll be able tomake your payments.
And common mistakes could affectyour pre-approval, too like running up too much credit card debtbefore the loan closes.
Basically, anything thatsignificantly impacts your financial picture between your pre-approval andloan closing could change yourmortgage eligibility.
Also keep in mind that apre-approval typically happens prior to finding a home. As such, your new homemust also be approved by the lender.
For example, the loan amount cant exceed the homesappraised value. And if youre getting an FHA or VA mortgage, the new home mustmeet government safety standards. The presence of lead paint in an older home,for example, could derail the home-buying journey.
Documents Youll Need For Nonconventional Loans
The documents listed above are typically required for both conventional and nonconventional loans, including FHA loans and USDA loans. However, some nonconventional loans may have other mortgage preapproval documents.
For example, since only certain people may qualify for the VA loan , youll need to provide further documentation to verify your eligibility. Depending on the borrower, such required forms may include:
DD Form 214: This verifies your military discharge, retirement or separation, and is required for veterans. Surviving spouses must provide their spouses DD Form 214, along with their marriage license and souses death certificate.
Retirement Points Statement : This form confirms the number of credible years of service in the military, including attending drills and going through training. This is needed for discharged members, who will also need to show proof of an honorable discharge.
Statement of Service: A statement of service proves active military status for active-duty service members, or current National Guard or Reserve members. It must be printed on official military letterhead and include the service members full name, date of birth, Social Security number, entry date of duty and time lost. It may also include credible years of service, date of activation, orders activated, training status and the name of the commander providing this information.
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A Step Further: Getting Preapproved
As noted above, a preapproval is a more formal step than to prequalify for a mortgage. You need to fill out a mortgage application, allow the lender to pull your credit score and provide documentation of your income and other finances.
A mortgage preapproval allows a lender to make a determination as to whether you can be approved for a mortgage or not. Once you’re preapproved, the lender will give you a letter that you can show to home sellers when making an offer, as evidence of your ability to obtain a mortgage.
Getting preapproved for a home loan does not guarantee you’ll be approved for the mortgage you could still be turned down if the home you chose does not appraise for an adequate value or if problems are discovered with your application during the underwriting process.
Though they aren’t mandatory, both mortgage prequalifying and preapproval are important steps in qualifying for a mortgage and buying a home. Both should be part of your plans for buying a home.
How Long Preapproval Lasts
Preapproval doesn’t last forever. Check your expiration date and keep it in mind as you look at homes. Though it varies from lender to lender, preapproval is typically valid for 60 90 days. If you haven’t settled on a house, you can request a renewal by giving your lender your most up-to-date financial and credit information.
The right home is out there.
Find it online at RocketHomes.com.
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Bringing It All To A Close
Youve made it to the final step in the home-buying process. All the planning, preparation and waiting are finally over. But before you get the keys to your new home, you have one more thing to do.
At your closing, you will meet with your closing agent to sign all your mortgage documents. Take your time, make sure you understand what youre signing and dont be afraid to ask questions. And voilà, once youve dotted all the Is and crossed all the Ts, youll officially be a homeowner!
The closing process doesnt have to be nerve-wracking if you know what to expect. We can help you prepare for this exciting step, so your big day is a success.
We understand how overwhelming the home-buying and mortgage process can be. You can count on us to help you through it. Buying a home can be one of the most exhilarating and stressful moments of your life. But finding a home you can call your own makes it all worthwhile.
What Is Mortgage Preapproval
Preapproval is as close as you can get to confirming your creditworthiness without having a purchase contract in place. You will complete a mortgage application and the lender will verify the information you provide. Theyll also perform a credit check. If youre preapproved, youll receive a preapproval letter, which is an offer to lend you a specific amount, good for 90 days.
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Copies Of Social Security Cards
Break open the safe. It is essential that you can provide your lender a copy of your social security card. Not only does this help verify that you are who you say you are and aid in preventing loan fraud, but it also helps to verify that you are indeed a U.S. citizen. Lending for foreign nationals is possible but extremely challenging, which is why foreign buyers usually have to purchase properties with all cash.
Your Mortgage Preapproval Checklist
To get preapproved for a mortgage, youll need a few documents detailing your income, assets and debt obligations. This helps banks and other mortgagees determine exactly how much theyre willing to lend you. Getting mortgage preapproval also helps you understand how much house you can afford, so you wont get your heart set on a home outside your budget. Well walk you through this checklist. We can also assist you with finding a financial advisor who can guide you through the entire home-buying process.
Compare mortgage rates here.
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What Happens If You Dont Get Pre
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.
Ready to get pre-qualified? In minutes, you can find a local lender on Zillow who can help pre-qualify you for a mortgage.
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