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Pre-Qualify for a Mortgage

You might have an idea of the loan payment and mortgage you can afford. But maybe the bank will feel otherwise. It's always best to pre-qualify for a mortgage so you know exactly how much a financial institution would be willing to lend you...and THEN you can determine what price range you can consider in your home search.

Pre-Qualification vs. Pre-Approval

Pre-qualification by a mortgage officer is a simple procedure by which you get an opinion as to how much you can qualify for and can discover any obvious obstacles that might cause problems. They take a look at your income, liabilities (credit card payments, car payments, etc.), and do a credit check so they can calculate how much of a loan you can afford based on these factors. You will find out:

Exactly how much home or land you can afford.
How much cash you will need for the down payment.
The minimum down payment, and advantages of higher down payments.
What the bank feels you can afford for a monthly payment.

Pre-approval goes a step further by underwriting your loan; you are authorized by that financial institution to borrow the specified amount. Pre-approval is weightier than pre-qualification, but is rarely necessary, except in unique circumstances. During the pre-qualification process, you will be notified if you need to consider pre-approval for a loan.

Why Pre-Qualify?

There are several reasons for you to pre-qualify for a loan:

You'll have to make a loan application sooner or later, unless you plan to pay cash, so pre-qualifying is just taking care of one step of that process.
Pre-qualifying speeds up the mortgage process, since it takes time to run reports and verify information.
You also save time by only looking at the homes that you can afford.
You won’t be disappointed by choosing a home and finding out later that a bank won't finance your decision.